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Research Report 16

Constraints in the market chains for export of Sudanese sheep and sheep meat to the Middle East

ISBN 92–9146–195–4 Constraints in the market chains for export of Sudanese sheep and sheep meat to the Middle East

Omar Hassan el Dirani, Mohammad A Jabbar and Babiker Idris Babiker

Ministry of Animal Resources and Fisheries

ILRI International Livestock Research Institute INTERNATIONAL LIVESTOCK RESEARCH

INSTITUTE i Authors’ affiliations

Omar Hassan el Dirani, Ministry of Animal Resources and Fisheries, Government of , , the Sudan Mohammad A Jabbar, International Livestock Research Institute (ILRI), Nairobi, Kenya Babiker Idris Babiker, Department of Agricultural Economics, University of Khartoum, Khartoum, the Sudan

© 2009 ILRI (International Livestock Research Institute). All rights reserved. Parts of this publication may be reproduced for non-commercial use provided that such reproduction shall be subject to acknowledgement of ILRI as holder of copyright.

Editing, design and layout—ILRI Publications Unit, Addis Ababa, Ethiopia.

ISBN 92–9146–195–4

Correct citation: el Dirani OH, Jabbar MA and Babiker IB. 2009. Constraints in the market chains for export of Sudanese sheep and sheep meat to the Middle East. Research Report 16. Department of Agricultural Economics, University of Khartoum, Khartoum, the Sudan, and ILRI (International Livestock Research Institute), Nairobi, Kenya. 93 pp.

ii Table of Contents List of Tables iv List of Figures vii Acknowledgements viii A note on the Sudanese unit of currency ix Executive summary 1 1 Introduction 8 2 Methodology 12 2.1 Study framework and sources of data 12 2.2 Description of the study areas 15 2.3 Data collection and analysis 17 3 Quality assurance system for export of live sheep and sheep meat 18 3.1 Quality requirements of importing countries 18 3.2 Institutional infrastructure supporting livestock production and trade 20 3.3 Supply chains for live sheep and sheep meat 23 3.4 Physical movement of traded sheep from producers to market outlets 33 3.5 Quality and safety assurance system for export trade 34 4 Structure and performance of domestic and export markets for live sheep and sheep meat 58 4.1 Domestic markets 58 4.2 Export markets 65 4.3 Spatial price integration 73 References 78 Appendix 1 Local names of the important diseases/conditions reported by livestock producers in the survey areas 80 Appendix 2 Monthly sales volume and prices of adult male sheep in Omdurman market, Khartoum 81 Appendix 3 Monthly sales volume and prices of adult male sheep in el Obeid livestock market, North 82 Appendix 4 Monthly sales volume and prices of adult male sheep in el Damazeen livestock market, State 83

iii List of Tables Table 1. Sudanese exports of live sheep, mutton and lamb between 2002 and 2006 9 Table 2. Average prices of live sheep and sheep meat and market shares of selected exporting countries in 2004 10 Table 3. Breakdown of sample sizes of units in the three surveyed states 16 Table 4. Human population and livestock densities in three states of Sudan 16 Table 5. Regulations governing the duration between slaughter and import, storage temperatures and shelf life for meat exported to Saudi Arabia 19 Table 6. Household and flock characteristics in Blue Nile, Gedarif and states 25 Table 7. Estimated coefficients and related statistics for equations explaining sales of sheep and goats 26 Table 8. Number of animals traded and specialization of traders in the primary and secondary markets in three states of Sudan 28 Table 9. Livestock market actors and functions by type of market in the Sudan 33 Table 10. Quality indicators of Sudanese live sheep and sheep meat for export 37 Table 11. Dominant sheep breeds (or types) in three states of Sudan 37 Table 12. Crude case fatality rates for diseases reported by household respondents in Sudan as important during 2003–05 40 Table 13 Proportion of sample households in Sudan according to use of veterinary services from different sources during the year prior to the survey 41 Table 14. Average distance and travel time to neatest veterinary facilities from households/flocks in the three states of Sudan 42 Table 15. Value of losses per household per year (2003–05) due to livestock diseases in Sudan 43 Table 16. Estimated coefficients of variable explaining level of expenditure on veterinary services and drugs in the three states of Sudan (using GLM procedure in SPSS) 44 Table 17. Distribution of traders according to health, safety and quality criteria they consider at primary and secondary markets in Sudan when purchasing sheep and goats, especially for export market 45 Table 18. Rank of most common diseases for which animals were barred by veterinary inspectors from selling at the primary and secondary markets in the three states of Sudan as reported by traders 45 Table 19. Preferred sheep weight by traders for their purchases (in kg carcass wt) in primary and secondary markets in three states of Sudan 46

iv Table 20. Inspection and selection criteria for quality assurance and certification of Sudanese sheep exports at different points in the export chain 48 Table 21. Number of sheep rejected at various points in the export chains for Sudan, 1997-2005 54 Table 22. Rejection rate of sheep according to cause at el Khowei and el Rahad quarantine centres in Sudan, 2002–05 55 Table 23. Percentage of inspected sheep rejected for various reasons by breed at the el Khowei inspection and vaccination centre in Sudan 56 Table 24. Number of sheep tested for Brucellosis monthly at el Obeid laboratory coming from el Khowei and el Rahad quarantine centres in Sudan, and rate of rejection, 2002 to 2006 56 Table 25. Percentage of tested sheep rejected for various reasons at the Veterinary Quarantine, 2002 to 2006 57 Table 26. Sources of finance of traders in three states of Sudan when business was started by market type 59 Table 27. Distribution of traders in three states according to sources of information in primary and secondary markets on prices, supply, and demand condition of purchase markets 60 Table 28. Distribution of traders in three states of Sudan according to main sources of information in primary and secondary markets on taxes, regulations and other government policies 60 Table 29. Average purchase and sale prices per animal by type of animal at primary and secondary markets in the three states of Sudan (in Sudanese Dinars) 63 Table 30. Number and composition of sheep transacted at selected primary and secondary markets by sample traders in three states of Sudan 64 Table 31. Major marketing problems as perceived by traders in primary and secondary markets in the three States of Sudan 65 Table 32. Number of Sudanese live sheep exporters and number of animals exported, 2003–06 66 Table 33. Marketing costs and margins for export live sheep (average live weight 45 kg) originating in selected markets in three states of Sudan (SD/head), June 2005 67 Table 34. Marketing costs and margins of light weight export quality lamb (average 25 kg live weight or 12 kg caracass weight) originating in selected markets in three states to export port, June 2005 68

Table 35. Marketing cost per head (in SD) of live sheep from production areas to the export port in Sudan for two export companies in 2006 69

v Table 36. Marketing costs and margins per head for live sheep and meat export from Gedarif State in Sudan (May 2005) 70 Table 37. Estimated cost and margins of heavy weight (average 45 kg live weight) sheep from el Khowei market in West Kordofan in Sudan to Jeddah via Port Sudan (June 2005) 71 Table 38. Estimated statistics for unit root test for prices movement and three estates in Sudan 75 Table 39. Johansen’s co-integration test results for number of co-integrated vectors for prices in three livestock markets in Sudan 75

vi List of Figures Figure 1. Major constraints along the Sudanese sheep and sheep meat marketing chain 4 Figure 2. Major breeds of sheep for export and their production areas in Sudan 8 Figure 3. Market chain framework to analyse constraints for sheep export 12 Figure 4. Domestic, cross-border and official export trade routes for Sudanese livestock 24 Figure 5. A general schematic diagram of the sheep and goat market chain in Sudan 29 Figure 6. Sheep marketing channels in Gedarif state 30 Figure 7. Sheep marketing channels in Blue Nile state 31 Figure 8. Sheep marketing channels in West Kordofan state 31 Figure 9. Quality assurance activities in the Sudanese live sheep export chain 34 Figure 10. Quality assurance activities in the Sudanese lamb export chain 35 Figure 11. Incidence of major diseases in three states of Sudan, 2003-2005 39 Figure 12. Seasonal incidence of major diseases in three states of Sudan, 2006 40 Figure 13. Monthly live sheep exports from Sudan (2004) 47 Figures 14–19. Impulse response functions for price shocks in the selected markets 76–77

vii Acknowledgements

The authors are grateful to Drs Ahmed Mostafa Hassan and Bashir Taha, Undersecretaries in Sudan’s Ministry of Animal Resources and Fisheries (MARF) during 2004–06 and 2007–08, respectively, under whose overall supervision the research project was implemented. The authors are grateful to the International Fund for Agricultural Development (IFAD) and the International Livestock Research Institute (ILRI) for funding the study.

The authors are also grateful to ILRI and the International Centre for Agricultural Research in the Dry Areas (ICARDA) for jointly supervising the implementation of the technical and administrative aspects of the project; to Dr Aggrey Majok (Project Coordinator) and Prof Hussni O Mohammed of Cornell University for providing technical guidance during the implementation of some of the activities; to Dr Hassan Mohammed Nur and Dr Ismail Adam Yagoub of the Ministry of Animal Resources and Fisheries and Prof Khitma el Malik of the Faculty of Veterinary Medicine, University of Khartoum for providing helpful support in the implementation of project activities; and to staff members in the Department of Livestock Services in the State Governments of Blue Nile, Gedarif and West Kordofan for providing local assistance for field work and other useful information. Other members of the research team, especially Abdelrahim Suleman, Rabeh Mahmoud and Meki Osman Meki, were helpful during the field survey. Members of the National Technical Committee provided useful feedback on project activities and progress. The authors bear sole responsibility for the content of this report.

viii A note on the Sudanese unit of currency

Until 1997, the Sudanese unit of currency was the pound (USD 1.00 = 2600 pounds). In January 1998 it was changed to the dinar (USD 1.00 = 260 dinars) and in June 2007 it reverted to the pound (USD 1.00 = 2 pounds), the unit that is currently in use. There are ready references for conversion between the old pound and the dinar, and the new pound. The dinar was the unit of currency during the time the surveys for this study were conducted (2005–06) so this report presents price figures in dinar.

ix Executive summary

Before oil was discovered in Sudan, export of livestock and livestock products was the country’s most important foreign exchange earner; it is currently the second most important source of foreign exchange after oil. The Middle East, especially Saudi Arabia, has been the traditional export destination for livestock and livestock products. Export occurs throughout the year, but volumes peak during the two months prior to the annual Hajj festival.

However, the pattern of demand in the Middle East has been changing in recent years. Increases in incomes and urban population, combined with a growing immigrant worker population, have contributed to a rapidly increasing demand for meat. Demand for food quality and safety assurance has also been increasing, and these countries are increasingly implementing sanitary and phytosanitary (SPS) regulations.

One consequence of these changes is that new suppliers like Australia, Brazil and New Zealand that are able to comply with new standards have entered the market and the volume of Sudanese exports has been on a downward trend. For example, live sheep export from Sudan decreased from 1.6 million animals in 2002 to 1.4 million in 2006 and lamb and mutton exports decreased from 8620 t to 2264 t during the same period. Moreover, there have been bans on imports from Sudan in the past due to outbreaks of transboundary animal diseases such as Rift Valley fever.

While there is some preference for Sudanese breeds of sheep in the Middle East markets, there are specific quality, health and safety requirements in addition to preferences for age, weight and other physical characteristics. Sudan’s declining and fluctuating market share is partly because of competition from alternative suppliers but mainly from Sudan’s own problems within the supply chains for sheep and sheep meat.

This study characterized the nature of some of these problems by using a market chain framework and collecting data on several components of the framework from three states (Gedarif, Blue Nile and West Kordofan) which are important supply hinterlands for sheep for both export and domestic markets. Sample data were collected from 360 households/flocks, 56 traders and several quarantine centres and export slaughterhouses in these states. Data analysis focused on how producers are linked with the terminal domestic or export markets through various actors and institutions along the market chains, and the constraints at different stages of the market chain. The main marketing constraints are summarized below.

The supply hinterlands of West and North Kordofan, Blue Nile and Gedarif states are located far away (an average of 1500 km) from export ports and Khartoum, the largest domestic market. Furthermore, poor quality roads link the supply hinterlands, particularly those in the

1 western part of the country, to the main seaports of Port Sudan and Sawakin. Consequently, trekking takes a long time, with negative consequences for the health and quality of the animals. Overloaded trucking to reduce transport costs also has similar consequences.

In the three states, market offtake rates for flocks range from 16–22% which are considered to be very low by the standard of commercially oriented flocks. With this level of offtake, sustained supply of export quality animals is bound to be difficult as no more than 40% of the animals sold by producers are of export quality; the remainder is absorbed in the domestic market. In the commercial herds/flocks in the developed countries, offtake rates of 40–50% are considered optimal. The number of animals sold is significantly higher among households whose main or sole source of livelihood is livestock, and for nomadic/semi- nomadic sheep producers compared to their sedentary counterparts. The actual number of animals sold per producer increases with flock size while offtake rate declines, because owners of larger flocks need not sell too many animals. Such flock owners are mostly nomadic or semi-nomadic and depend almost entirely on livestock for their livelihoods. Therefore, increased offtake has to be encouraged among this group of producers in order to sustain supply for export.

Health problems at the household and flock levels reduce the seasonal and overall supply of export quality animals to market. The household/flock-level survey in the three states showed a high incidence of heartwater, peste des petits ruminants (PPR), and sheep pox. For example, in 2006, 57% of flocks in Gedarif had heartwater, 64% in Blue Nile had PPR and in West Kordofan, the incidence of both heartwater and sheep pox was about 30%. Incidences were generally higher in the dry season. Since high incidence of PPR was not expected by the veterinary staff in the survey states, blood samples were collected for serological analysis to validate producer responses. The serological tests confirmed the high prevalence of PPR in the survey states.

Overall mortality was 6% in Gedarif and West Kordofan and 11% in Blue Nile but crude case fatality rates (CCFRs)1 for the major diseases were very high. During 2003–05, the CCFR was 34–48% for PPR, 24–40% for sheep pox and 34–42% for heartwater. One of the reasons for the observed high morbidity and mortality is poor access to health facilities. For example, the nearest veterinary health facility is over 40 km away from 33% of households in West Kordofan, 29% in Blue Nile and 52% in Gedarif. These health facilities are poorly staffed and lack adequate equipment and chemicals for diagnostic tests. Consequently, only about 44% of the sampled households used any professional veterinary service during the year prior to the survey. Of these, 37% used public or private veterinary services, 17% consulted paraveterinarians (drug sellers and community animal health workers) and 10%

1. Crude case fatality rate is the number of deaths divided by the number of cases.

2 used traditional medicine. About 92% of the households used self-prescription to treat their animals and 65% felt confident that they had enough knowledge and experience to do so.

The consequences of high disease incidence, morbidity and mortality are heavy losses for the flock owners and limited market supply of export quality animals. In 2005, the average economic loss per household due to diseases was 176,276 dinars (USD 766), 74% of which was due to loss of animals, 18% due to cost of drugs and services for preventive and curative treatment and 8% due to loss of output. Some of the important factors that affect the level of expenditure on veterinary services and drugs include flock size, distance to drug stores, veterinary clinics and laboratories, and the number of times a professional veterinarian was consulted or self-prescribed drugs were used.

Figure 1 summarizes the main constraints along the market chains for live animals and meat and the key activities that relate to quality and safety assurance. Traders use physical characteristics and some well-known symptoms of diseases like sheep pox, pneumonia, heartwater and PPR to screen animals before purchase at the market or in the village. Inspectors at the livestock markets also certify animals based on visual examination or observation of physical characteristics and symptoms of certain diseases such as sheep pox, pneumonia and heartwater. There is an elaborate system of inspection and certification for live animals and meat involving quarantine, testing and screening for specific transboundary or trade-related diseases. There is also strict screening at the port of arrival in Saudi Arabia, where a whole vessel is usually rejected if only one or two animals with unacceptable symptoms are detected. Such action provides a good signal and an incentive to undertake inspection and screening in a serious manner. However, there are either procedural or technical deficiencies in the implementation of the quality and safety regulations and tests, resulting in high rates of rejection of animals along the export chains. For example, during 1997–2005, 31% of the animals offered for export were rejected within the domestic sections of the chains and another 2% were rejected between the export and import ports. Such high rejection rates increase costs and reduce competitiveness.

One of the challenges in addressing the problem of animal rejection is that, except for brucellosis, causes of rejection are not recorded for individual animals. Analysis of records at inspection and vaccination centres showed that brucellosis, lymph node, abscesses and mange were the main reasons for rejection. Although one major laboratory and several primary and terminal quarantine centres were well organized and conducted standard tests, it was unclear if this was the case for all laboratories and quarantine centres. One reason for rejection at the higher end of the chain is that symptoms of trade-related diseases may appear after the animals have left the primary quarantines. This indicates a need for a high degree of rigour to be applied during screening and testing animals at the primary inspection stages.

3 Saudi Arabia entry Terminal markets point market : Omdurman livestock markets and export slaughterhouse,  Rejection of live International Meat Company and Nyala sheep at Jeddah slaughterhouses port  Absence of regulation of brokerage services at  Short shelf-life of livestock markets or slaughterhouses meat  Absence of a formal quality assurance system; few  Poor packaging actors benefiting from the informal grading system systems  Absence of a formal traceability system  Lack of specialized vessels for sea transport of live sheep  Lack of refrigeration facilities (specialized containers and airplanes with chilling facilities) at Khartoum airport

During purchases or extra-market purchases Secondary markets  Risk of loss or theft of sheep  Meagre veterinary service provision: Only animal health bought at producing areas inspection and vaccination, priority for transboundary diseases (watering points, grazing areas, and screening of export trade animals. Weak enforcement of villages) animal welfare standards.. No isolation for sick and suspected  Brokers and agents: Reliance on animals subjective visual inspection to  Absence of formal quality assurance system:. Few actors screen animals for clinical benefit from the informal grading system in use symptoms of disease or assess  Limited provision of services and infrastructure by local quality attributes during authorities (water and troughs, treatment/vaccination crushes, purchase (e.g. breed, sex, age or isolation facilities, loading ramps and fencing) and lack of nutritional status) accurate record keeping system  Brokers: high brokerage costs  Unregulated tax collection system and weak enforcement of  Absence of regulation of brokerage services informal contracts and property  Absence of formal traceability system rights  Exporters: high cost of labour, trekking and trucking during peak seasons

Primary markets  Lack of veterinary service provision  Absence of formal quality assurance system: Few actors benefiting from the informal grading system in use because of monopoly of relevant knowledge and information  Limited provision of services and infrastructure by local authorities (water and troughs, treatment/vaccination crushes and fencing) and lack of an accurate and comprehensive record keeping system  Absence of regulation of brokerage services  Absence of formal traceability system  Insecurity during transport of sheep from Greater states leading to increased transaction costs (‘rent seeking’ and unofficial taxes)

Figure 1. Major constraints along the Sudanese sheep and sheep meat marketing chain.

4 The market chain comprises several intermediaries along the supply chains and multiple local government taxes en route to the ports; this results in high marketing and transactions costs. The estimated producer price of export quality sheep in the three states is 65–77% of the free on board (FOB) price at Port Sudan or Sawakin, which is quite high. Consequently, the competitiveness of Sudanese sheep is low. However, the weighted average producer price of all animals sold is much lower because no more than 40% of the animals sold are high- grade animals suitable for export at a premium price. The remaining animals are sold on the domestic markets where prices have increased due to appreciation of the value of the dinar, propelled by oil revenues. Another reason for the high producer price of export-quality sheep is that the trade is largely financed by producers who accept deferred payment due to traders’ lack of access to formal credit; the producers factor in the time value of money and demand premium price for export quality animals.

Major supply markets in the hinterlands are integrated with the terminal market in Khartoum as indicated by price co-integration. However, responses to price shocks are variable between markets. Some markets are more responsive than others and supply markets respond more quickly and intensely to shocks than terminal markets. Also due to inadequate mobility between the supply markets in different states, responses in these markets to shocks in other similar markets are fairly low. Major marketing problems mentioned by domestic traders include multiple taxes, unstable price, lack of infrastructure/facilities at the markets, unauthorized road taxes, low demand for animals, low price in import market and limited or no access to formal credit. The main problems that export traders face are lack of adequate high-quality animals in the dry season and competition from alternative suppliers in the Saudi market.

Recommendations

On the basis of the above findings, the following recommendations are made for actions to improve the functioning and efficiency of the market chain and for approaches to future studies and research.

1. Branding and promotion of Sudanese sheep, highlighting its natural grass-fed character, quality and safety assurance and certification, and reliable supply will help to capture a niche market within the overall expanding market demand for animals from a variety of suppliers. MARF (2008) produced a promotional video as a campaign tool to promote Sudanese sheep, though it needs to be refined, expanded and updated. Sudan is facing a declining market share of the rapidly expanding market for live animals and meat in the Middle East, especially the Saudi Arabia. The current marketing system is based on extraction of animals of relatively homogeneous traits from diverse natural production

5 systems rather than improving production systems to respond to emerging market demand for more uniform and better quality animals. This system works because of preferences among Saudi consumers for some Sudanese breeds of sheep which are grass-fed and whose meat has a distinct taste. It is unlikely that this advantage will be adequate to maintain a long-term market share of Sudanese sheep in the Saudi market.

2. Efforts should be made to increase commercial offtake rate, especially given that flock sizes are quite large, especially among the nomadic/semi-nomadic households, but offtake rates are quite low and majority of the animals supplied to the market are not of export standard. Sudan’s market share in the Middle East cannot be sustained or increased without a significant increase in the offtake rate.

3. Inspection and certification systems should be applied more rigorously to reduce rejection rates at higher levels of the export chains. Since high incidence of some diseases and high rate of rejection of animals affect the supply of good quality meat and animals in the market, the following steps need to be taken on a priority basis to reduce rejection rates and overall costs of marketing per animal: • Inspection and certification of animals at primary and tertiary quarantine centres should be enforced and quarantine record keeping improved to enable accurate identification of the causes of rejection of animals and assure proper health certification along the market chain. • Better clinical capacity and records at every step in the chain are required to develop long-term predictive disease statistics. • Regular and periodic complementary serological studies and examination of clinical records for validation are required to build a reliable system for disease diagnosis, reporting and control. • Strategies are needed to improve veterinary service delivery by field staff and laboratories. Improved veterinary health services will reduce disease incidence, mortality and morbidity and improve the quality of marketed animals. In the medium to long term, health facilities and laboratories need to be better equipped and the number of veterinary staff in the public and private sectors increased. 4. Taxes by local and provincial governments should be harmonized and lowered to reduce overall transaction costs and improve competitiveness. The state and local governments should not only consider livestock as a source of revenue but should reinvest tax revenues for the benefit of the livestock sector and consider alternative options for revenue generation. Agricultural and rural development activities should be promoted and more remunerative jobs created so that fewer people will need to operate as intermediaries in the livestock trade.

6 5. Increased access to credit is required to improve producer competitiveness. Long- term sustained access to Saudi markets for Sudanese sheep will require investment towards improved animal productivity and quality through dissemination of improved management and technology, disease control measures and extension services. Providing producers, traders and exporters with access to formal institutional credit will help to induce adoption of new technologies by producers and better trading practices by traders, provided the cost of formal credit is balanced by better market prices for quality and safety.

6. An integrated systems approach using value chain analysis should be applied to research, extension, technology dissemination and marketing to improve the effectiveness of the supply chains. To accomplish this, multidisciplinary approaches involving epidemiology, economics, animal production and other relevant disciplines will be required. Given that multiple institutions are involved in the livestock industry, coordinated efforts will also be needed to identify and implement institutional options for animal health delivery and livestock market improvement. This effort should be led by MARF and involve other public, private and non-governmental partners engaged in agriculture and rural development because livestock is only one component of the rural economy.

7 1 Introduction

Sudan’s land mass spans over 2.5 million square kilometres and the country has one of the harshest climates in the world, with one-third of the total land area being desert, about 40% suitable for grazing and less than one-quarter potentially arable (FAO 1997). Sudan has a large livestock population, estimated in 2006 at 41 million head of cattle, 50.1 million sheep, 42.1 million goats and 4 million camels. Of the total livestock population of the Arab world—the main market for Sudanese livestock—Sudan accounts for about 70% of cattle, 31% of sheep, 49% of goats and 25% of camels. Sudan also accounts for some 43% of the Arab world’s red meat production. The main livestock production sites are located far from the major consumption centres and export outlets. Economically valuable livestock populations are concentrated in northern, western and southern Kordofan and Darfur accounting for 36% of cattle, 40% of sheep, 36% of goats and 33% of camel populations. Blue Nile and Gedarif states are also important supply hinterlands for export sheep (Figure 2).

Sudan Red Northern states Northern Sea

Port Sudan North Sawakin Darfur R. N.

Omdurman Khartoum State North Gezira Kordofan Gedarif W.D. W. Sinar N.

Blue S.D. S.K W.K Nile

2 State Area Km Gedarif 75,263 Blue Nile 84,445 West Kordofan 111,373 Khartoum 22,142

Figure 2. Major breeds of sheep for export and their production areas in Sudan.

The livestock sector in Sudan is an important contributor to the national economy, accounting for 25% of the gross domestic product (GDP) and employing 40% of the country’s population. Before 1999, livestock exports generated 20–25% of the national

8 foreign exchange earnings (second to oil). However, oil is now the primary foreign exchange earner (accounting for 82.1% of the total value of Sudanese exports in 2004) while agriculture ranks second (Central Bank of Sudan 2004). The contribution of livestock to export earnings has declined to below 8% (MARF 2005). Nearly all Sudanese exports of live sheep and sheep meat are to Saudi Arabia (Table 1). This lack of diversified export destinations for Sudanese sheep and sheep meat export has been a long term characteristic of the sector (FAO 1997).

Table 1. Sudanese exports of live sheep, mutton and lamb between 2002 and 2006 Live sheep % to Mutton and lamb % to Year (‘000 head) Saudi Arabia (tonnes) Saudi Arabia 2002 1603 99.9 8620 83 2003 1315 99.6 9700 81 2004 1704 99.8 5565 88 2005 1272 99.7 4710 92 2006 1422 99.8 2264 98 Source: MARF (unpublished data). Demand for meat in the Middle East—especially in the Saudi market—has increased rapidly, propelled by rising income levels, population growth, urbanization and growth in the food service sector from increased investment in tourism. However, Sudan’s market share and absolute exports to the Saudi market have declined in recent years. This decline was exacerbated by a ban on imports from Sudan in 2000–01 following an outbreak of Rift Valley fever in the Horn of . Although the ban was later lifted, the process of regaining the export market share has been slow, resulting in other countries like Australia and New Zealand increasing their share of the Middle East market. In the export market for live sheep, Australia has the advantage of lower prices compared to Sudan although Syria seems to benefit from non-price factors which account for its slightly higher market share compared to Sudan despite relatively higher prices (Table 2). Sudan’s relatively lower market share of fresh and frozen sheep meat is primarily due to differences in product characteristics, namely, shelf life, packaging, taste and average carcass weight.

Thus, although Sudan has the advantage of being near the Gulf markets for sheep and sheep meat, it faces competition from Australia and New Zealand in terms of price, reliability of supply and terms of trade, and from Syria in terms of product quality and other non-price factors.

International meat trade is mainly in cuts or parts, not in the form of live animals or carcasses. The slaughter of a meat animal automatically generates a full set of muscle meat cuts, as well as trimmings, offal and other by-products. The value of a carcass is the composite value of the cuts and by-products while the derived value of a meat animal is the

9 composite value of the carcass and by-products, less processing and transaction costs (Dyck and Nelson 2003). However, Sudan’s level of livestock product processing falls below the industry threshold level, compared to actual demand and the country’s livestock resource potential. For instance, in 2004, New Zealand exported 442,200 t carcass weight equivalent (CWE) out of 39.6 million head of sheep (i.e. 55.8% offtake rate) while Sudan exported 40,400 t (CWE) out of 48.9 million head of sheep (0.8% offtake rate).2 Low quantities of meat exports from Sudan are due to lack of expertise in meat processing, handling and packing. Building capacity in meat processing technology would contribute towards the future growth of the meat industry (Ibrahim 2004).

Table 2. Average prices of live sheep and sheep meat and market shares of selected exporting countries in 2004 Young sheep meat Sheep meat Live sheep (fresh or frozen) (whole fresh carcasses) Exporting country Price Market Price Market Price Market USD/t share (%) USD/t share (%) USD/t share (%) Sudan 1771 29 3043 na 4243 69.3 Syria 3054 31 na na na na Jordan 2696 1 na na na na Yemen na na na 1473 0.13 Egypt na 3202 1 3149 0.06 Pakistan na 1908 32 2175 5 Australia 1107 38 4100 36 2254 3 New Zealand na na 4429 22 2884 20.4 Average price c.i.f. Jeddah 2382 3336 2696 na: Not applicable. Source: AAAID (2005). Sudanese live sheep and sheep meat is recognized in Saudi Arabia markets as ‘Swakni’; except for removable stickers on meat carcasses, there is no formal branding or labelling. Sudanese meat is not promoted in domestic or international markets and there are currently no programs aimed at stimulating demand in Middle East countries through influencing consumer attitudes, building confidence in the quality and integrity of the product and enhancing the appeal of Sudanese meat.

The problem faced by Sudan is thus one of enhancing its competitiveness in the Middle East markets for sheep and sheep meat in order to increase and maintain its market share. This would entail improving the efficiency of internal marketing systems and livestock export procedures, and improving product quality. With regard to quality, serious attention needs to be given to grades, standards and SPS measures, in compliance with international agreements.

2. Calculated from export figures in 2004 by adding the quantities of mutton and lamb meat export to live sheep export then converting the figure into tonnes (conversion rate: 20 kg carcass weight per head).

10 The objective of this paper is to analyse the causes of declining market share of Sudanese sheep and sheep meat in the Middle East market, especially in the Saudi market, by examining the constraints in the export supply chains. The following major factors are hypothesized to explain constraints limiting export to Saudi Arabia:

• There are specific export requirements for quality assurance and safety of Sudanese sheep and sheep meat, and there are rules and procedures in place in Sudan to test, certify and assure supply of quality and safe animals and meat to the Saudi importers. However, these are inadequate and inefficient to match the SPS standards of the importing country. • Multiple intermediaries are involved along the market chains resulting in several points of taxation along the value chains; this leads to increased transaction costs which lower competitiveness. • Domestic livestock markets are spatially integrated and therefore can respond quickly to varying import demand requirements. A market chain framework linking producers and importers through the intermediate markets and actors was used to analyse these factors. Both secondary and primary survey data were used to generate evidence on these factors.

11 2 Methodology 2.1 Study framework and sources of data

A supply chain framework was used to represent the nature of import and domestic demand and requirements as the driver of the livestock trade (Figure 3). The framework also shows the role of animal health and marketing institutions and services at various points along the supply chains.

Importers’ requirements of product characterstics including quality and safety

Health services facilities/capacity Export slaughterhouses Terminal markets/export points at provincial level - Ch. of traded animals - Quarantines - Ch. of markets and traders - Digital labs. clinics, vaccination - Transaction costs service, vet staff drug manufacturers, Slaughterhouses/butchers drug stores, quarantine, vet schools, rules/regulations governing health services and markets Supermarkets Consumers

Secondary markets - Ch. of traded animals Slaughterhouses/ - Ch. of markets and traders butchers - Transactions costs

Health facilities/capacity at district level Consumers Primary markets - Ch. of traded animals - Ch. of markets and traders Local butchers/ - Transactions costs slaughterhouses Health facilities/capacity at local level

Consumers

Households/flocks - Producer characteristics - Animal characteristics in terms of health, quality, safety, productivity and other criteria - Market constraints, transaction costs

Figure 3. Market chain framework to analyse constraints for sheep export.

12 The aim was to identify the main market activities that could either promote or constrain market access by characterizing the sheep markets in Sudan and identifying the sequence of primary and supporting activities that would lead to increased exports and better quality products for local consumers and importing countries.

Marketing institutions and transaction costs are key elements of this framework. Institutions include public and private sector business firms of various sizes and types and the services they provide, as well as rules, regulations, norms, practices and facilities that govern the functions of the business enterprises (Padberg et al. 1997). Marketing failure or faulty performance may be traced to many causes, including imperfect information, high transaction cost, lags in adjustment to change and inadequate infrastructure.

According to the new institutional economics approach, the unit of analysis is the transaction rather than the price. Exchange itself is costly. Transaction costs, which are distinct from physical marketing costs such as those for transport and storage, arise from the coordination of exchange among market actors. They include the costs of obtaining and processing market information, negotiating contracts, monitoring agents and enforcing contracts (Williamson 1985; Hoff and Stiglitz 1990; North 1990; Gabre- Madhin 2001). However, it is widely recognized that market transactions, particularly in developing countries like Sudan, are often embedded in long-term, personalized relationships.

Personalized exchange emerges in response to commitment failure, in which the risk of breach of contract or opportunism is high, resulting from lack of market information, inadequate regulation and the absence of legal enforcement mechanisms. Institutions that build trust and promote reputation and social capital, such as trade associations, solidarity networks and groups that enhance ethnic or religious ties, emerge to circumvent commitment failure (Gabre-Madhin 2001). Individual effort to minimize transaction costs leads to the emergence of alternative institutional arrangements. The link between transaction costs and the emergence of institutions has long been recognized in institutional economics theory.

In Sudanese livestock markets, transaction costs include costs of:

• transportation • feeding and grazing • marketing levies and taxes imposed by local and national authorities • mortality or loss of animals during transit • slaughtering and processing • capital (interest on the money tied up in the livestock from the point of purchase to the point of sale)

13 • opportunity cost or salary of the trader or butcher. In order to characterize the health- and market-related constraints that limit the ability of exporters to satisfy importers’ needs, the following levels of the supply chain were analysed:

• village-level livestock resources, services and marketing infrastructure • households and flocks • primary, secondary and tertiary livestock markets, and marketing institutions • livestock traders and exporters • local- and district-level veterinary service providers • veterinary quarantine stations for export markets and • slaughterhouses for domestic and export markets. Livestock production in Sudan is predominantly pastoral. There are three systems of animal production: traditional low-input-low-output system, modern or intensive system, and feedlot. The traditional system has three subsystems: (1) pastoral nomadism and transhumance system, (2) sedentary and semi-sedentary agro-pastoralism and (3) urban and peri-urban scavenging system. A pastoral system is one in which over 50% of the total household revenue (the value of home consumption plus income) or more than 20% of human food energy is derived from livestock or livestock products. There is little integration of livestock and crops in this system. An agro-pastoral system is one in which 10–50% of total household revenue is derived from livestock or livestock products (FAO 1997). Livestock migration has been recently constrained following the tribal conflict of 2000 between the Meidob and Berti of Northern Darfur (Young 2005). The conflicts in Darfur have reduced the level of supplies from primary to secondary markets thus raising the price of meat and livestock in the latter. Livestock prices are also on the decline in some primary markets that are cut off from secondary markets.

The modern or intensive system is mainly for milk and poultry production and is based on irrigated fodder and agro-industrial by-products. The feedlot system is centred on livestock markets (with seasonal activity during summer) to support domestic consumption and export. Conflicts in have made grazing areas and their migratory and commercial stock routes inaccessible; this has led to remote routes being used to transfer animals to the main urban and export markets, resulting in high marketing costs.

Sudan’s Central Bank, Ministry of Foreign Trade, Live Animals and Meat Export Promotion Council and the Livestock and Meat Marketing Corporation (LMMC) play complementary roles in livestock and meat export. Before livestock marketing was liberalized in 2002, the LMMC was the only government-sanctioned institution authorized to facilitate livestock trade and export marketing activities. It was financed through a fee levied on all sales of livestock in markets that it operated. The main objective of establishing the LMMC was to stabilize producer prices, particularly of livestock and meat destined for export markets. The

14 corporation was dissolved in April 2002 following the liberalization of livestock marketing which saw the entry of the private sector.

In order to characterize the supply chains and their inter-linkages, secondary data were collected from relevant departments at national, state, local authority and administration unit levels. Structured and non-structured questionnaires were also used to collect primary data from market chain actors in Blue Nile, Gedarif and West Kordofan states. The criteria used to select these three states were: the relative importance of export quality sheep; the diversity of production systems; relative importance of domestic vs. export market outlets; and the prevalence of poverty.

In order to conduct surveys on various actors described in the supply chain framework, stratified multistage random sampling was proposed to sample one local authority in each state, and one administrative authority within each sampled local authority. From each of the selected administrative units, 10% of the villages were randomly sampled. Household lists were obtained from local veterinary authorities, administrative units and local tax offices. Households where small ruminants were not kept were excluded.

In Western Kordofan state, only one local authority—el Nihood—was sampled because of insecurity in the other local authorities situated adjacent to Southern Darfur state. Within el Nihood local authority, el Khowei administrative unit was sampled and villages within this administrative unit were randomly sampled.

There were some problems in applying the stratified sampling frame in Gedarif and Blue Nile because of the nomadic nature of the households and the absence of clearly defined villages in the Blue Nile state as a result of conflict in the region. Thus, purposive sampling was used to select local authorities from Gedarif state (Abu Rukhum, Bazoora, el Hawata, Elmagata and Gedarif local authorities) and Blue Nile state (Aboghmy, Badows, Boought, Midiem, Ofod, Wadabook and el Damazeen local authorities) after discussions with producers, traders and local experts, and officials from veterinary authorities, ministries of finance, livestock taxation units and local producer associations. The breakdown of the sample sizes of units in the surveyed states is summarized in Table 3.

2.2. Description of the study areas

Gedarif has a higher human population density and lower livestock density than compared to Blue Nile and West Kordofan states (Table 4). Each of the three states has a distinct comparative advantage in sheep production.

15 Table 3. Breakdown of sample sizes of units in the three surveyed states Survey unit gedarif Blue Nile West Kordofan Total Village level rapid appraisal 8 5 6 19 Households 46 108 106 260 Livestock traders 16 21 19 56 Livestock markets 6 7 8 21 Veterinary services 5 4 1 10 Veterinary quarantines 1 0 2 3 Slaughterhouses 3 3 2 8

Table 4. Human population and livestock densities in three states of Sudan

Gedarifa Blue Nileb West Kordofanc Area (km2) 75,263 84,445 111,373 Human population density per km2 15 10 9 Sheep density per km2 16 43 34 Goat density per km2 16 3 18 Cattle density per km2 2 35 30 Camel density per km2 2 <0.5 4 Number of sheep and goats per capita 2.0 4.6 5.8 Sources: a. State Ministry of Finance, Economy and Labour Force. Livestock Taxation Administration, Gedarif (2005); b. Veterinary Authority, Blue Nile State, Damazeen (2005); and c. General Planning and Animal Resources Economics Administration, MARF, Khartoum.

Gedarif state is rich in fodder, grazing areas and by-products of sorghum and sesame. It is also situated close to Port Sudan, the main point for export of livestock and livestock products. During the rainy season, the state has abundant fodder and water in the northern Butana area. In the summer when water is scarce, sheep populations are concentrated around the Blue Nile River in large sorghum and sesame agricultural schemes3 and around hafeers (artificial water reservoirs) and deep-bore wells. Mixed crop–livestock systems predominate and the sheep produced in the state are destined for both domestic and export markets.

Blue Nile state is rich in water resources. Besides the Blue Nile River and its tributaries (Dindir and el Rahad), this state has 750 hand pumps, 58 boreholes, 21 deep wells and 3 sudd (small dams). For this reason, the livestock population in Blue Nile state increases during the dry season due to in-migration from neighbouring states. The livestock production systems are mainly nomadic and semi-nomadic. Watiesh desert sheep are reared for export production of prime quality lamb with an average carcass weight of 12 kg.

3. The standard area of a scheme is 1000 feddans (one feddan is approximately one acre or 0.417 hectare). Some farmers may have up to 10 schemes in a given area. There are also small schemes with areas ranging from 10 to a few hundred feddans.

16 West Kordofan state has a mixture of nomadic, sedentary and semi-sedentary production systems. Hamari desert sheep, the main breed reared in the state, are the highest quality for live sheep and the second-best breed for meat. The bulk of Sudan’s live sheep exports and meat for local consumption are from this state. In addition, most of the large sheep (average 35–45 kg live weight) and high-quality lambs purchased during the annual Hajj and Ramadan religious festivals originate from West Kordofan state.

2.3. Data collection and analysis

Survey data for Gedarif, Blue Nile and Kordofan states were collected by questionnaires in March, May and June 2005, respectively. Surveys of markets, traders and exporters were conducted in the terminal market during June 2006. The main problems encountered in conducting the surveys were related to the dry season: where surveys were conducted, it was difficult to find flock owners in the vicinity as they often moved long distances in search of feed and water.

Questionnaires were developed for household/flock, market, trader, quarantine and slaughterhouse surveys and pretested before use. Data were collected on the profiles of the respective target, their assets or inventories, functions, functional mechanisms, productivity, costs and margins, and related problems. Discussion groups were conducted during the same periods at livestock markets, government offices (local councils, taxation and zakat, and veterinary authorities) and nomadic camps. The collected data were analysed using SPSS software.

17 3 Quality assurance system for export of live sheep and sheep meat 3.1 Quality requirements of importing countries

Several countries in the Middle East, the main destination of Sudanese export sheep and sheep meat, are upgrading their SPS standards for import of live animals and animal products to international standards. Saudi Arabia has preference for Sudanese sheep and sheep meat because the products meet specific quality and safety characteristics. Enforcement of quality regulations is the responsibility of the Saudi Ministry of Agriculture and Water. Quality requirements of Egypt and Jordan, although not major importers, are also discussed as these two countries are potential export destinations for Sudan. Mariner (2007) gave a more detailed account of the dynamics of demand for meat and live animals and SPS requirements in selected importing countries in the Middle East.

3.1.1 Saudi Arabia

Imported animals are inspected at the major ports of entry; both physical and laboratory tests are performed.

Exporters of live animals to Saudi Arabia must provide the following documents:

• Veterinary health certificate declaring the animals to be free from epidemic or contagious diseases. The certificate is signed by a qualified veterinary officer from the Federal Ministry of Animal Resources and endorsed by a senior veterinarian. • Certificate of origin authorized by the Sudan Chamber of Commerce • Commercial invoice giving details of the shipment • Bill of lading Importers of meat in Saudi Arabia require the following documents:

• Health certificate from the federal veterinary authorities indicating the results of ante- and post-mortem examinations and certifying the meat to as originating from disease- free animals and fit for human consumption. • Certificate of origin authorized by the Sudan Chamber of Commerce and counter- signed by the Saudi Embassy in Khartoum • Commercial invoice giving details of the shipment • Bill of lading • Carcass label that indicates: names and addresses of the exporting and importing companies; date of slaughter; types of meat and carcass temperature • Certificate ratified by the Saudi Consulate or its authorized representative, or issued by a recognized Islamic centre or organization declaring that the animals were

18 slaughtered in a licensed abattoir in accordance with Islamic procedures; each carcass must bear a stamp indicating that it was slaughtered under the supervision of the centre or organization. The veterinary health certificate, certificate of origin and commercial invoice are counter- signed by the Saudi Embassy in Khartoum. Table 5 summarizes the regulations governing the maximum allowable interval between slaughter of the animals and arrival of the meat products in Saudi Arabia, the recommended storage temperatures and the shelf life of the chilled and frozen meat products.

Table 5. Regulations governing the duration between slaughter and import, storage temperatures and shelf life for meat exported to Saudi Arabia

Maximum allowable interval Storage Product Type Shelf life between slaughter and arrival temperature (°C) Chilled meat Carcasses 10 days 4 weeks –2 to 0 Vacuum packed 40 days 10 weeks –2 to 0 Frozen meat 4 months 10 months Below –18

Source: Ibrahim (2004).

3.1.2. Egypt

The Egyptian market stipulates the following regulations and requirements for imports of live animals (cattle and sheep) and chilled bone-in-beef from Sudan.

Requirements for import of live sheep

• Only male sheep shall be imported. • Animals shall be quarantined at the shipping port in Sudan for not less than 30 days. • Serological testing for foot-and-mouth disease (FMD) should be carried out during the quarantine period. Requirements for import of live cattle

• Only male animals younger than three years old and over 300 kg live weight shall be imported. • Animals shall be free from contagious diseases, particularly FMD, rinderpest and contagious bovine pleuropneumonia (CBPP). • Animals shall be quarantined at the shipping port in Sudan for not less than 30 days. • Animals shall be drenched, injected and sprayed against internal and external parasites. • Serological testing for FMD, rinderpest and CBPP shall be carried out during the quarantine period. • Dung shall be disposed of by fermentation as organic fertilizer.

19 Requirements for import of chilled bone-in-beef

• Animals intended for slaughter should be quarantined for 21 days and tested for contagious diseases from the 16th day. • Animals testing negative should be slaughtered in approved facilities. • Only the fore and hind quarters shall be exported; the quarters shall be packaged in labelled cartons and stored at 0–2°C. • Chilled bone-in-beef shall be deboned immediately upon arrival at the Cairo airport in one of the government deboning halls under supervision of veterinarians from the Public Corporation for Veterinary Services. • A certificate of origin and copy of pro-forma invoice shall accompany the shipment. 3.1.3 Jordan

Jordan is both an importer and exporter of live sheep and sheep meat. It is currently seeking to access markets in the First World and is adopting SPS and World Trade Organization standards to process imported products for re-export to terminal markets. Jordan imports processed sheep meat and beef from Sudan but not live sheep. It recently began importing live cattle from Sudan; following are the import regulations stipulated by the Jordanian Ministry of Agriculture:

• The shipment should be accompanied by a veterinary health certificate that certifies the cattle as free from infectious diseases and a certificate of origin stating that the animals are from a disease-free zone. The animals should not have suffered from FMD during the previous three months. • The cattle should be kept in official veterinary quarantine for 30 days prior to shipment, during which time serological testing for brucellosis and laboratory examination for FMD strain 3ABC should be carried out. The animals should also be dipped or sprayed to ensure that they are free from external parasites. • The cattle should not be vaccinated against FMD, lumpy skin disease or CBPP but should be vaccinated against haemorrhagic septicaemia (HS) • The animals should be quarantined upon arrival in Jordan for at least 14 days. • Transportation, loading and unloading of animals should be carried out according to Jordanian standards. 3.2 Institutional infrastructure supporting livestock production and trade

Following the liberalization of livestock marketing in Sudan, the private sector is playing the lead role in production and marketing services needed to support livestock exports. Nearly all slaughterhouses and tanneries have been privatized. The responsibilities of the public sector are now limited to regulation, research, planning and investment promotion. The government also has a role to play in fostering a supportive policy and infrastructure

20 environment by overseeing activities such as public health and food safety in relation to hygiene and sanitation of meat slaughtering and processing facilities for exports; monitoring and control of animal diseases; and documentation. In addition, new federal policies that encourage the export of livestock are being developed. One such policy allows traders to have unrestricted access to their foreign exchange earnings, whether to use it for importation of goods, sell it to the bank or to a third party (Aklilu 2002).

Limited credit is available and most working capital is generated within the industry. Financial resources are fully extended and are a major constraint to export expansion (FAO 1997). The main inputs are veterinary products, which are now imported, distributed and retailed entirely by the private sector.

The other important input for the livestock industry is feed, which is a major constraint that the government is making only limited efforts to overcome through research on cultivated and irrigated fodder and pilot projects on range management (Ibrahim 2004). Liberalization of markets has not delivered the expected results because markets do not function smoothly or, in some cases, even exist. Access to assets such as land and water is unequal and often reflects intractable patterns of inequality. Poor people’s decisions are geared to avoiding risk and vulnerability rather than optimizing investment returns (Brückner 2004). In fact, the livestock sector in Sudan has suffered from negligence compared to the strong development- oriented policies in irrigation and mechanized farming. Development spending has hovered around 1% of public investment in spite of livestock’s 10–20% contribution to GDP. Some reasons for the neglect include production largely to satisfy domestic needs, exports dominated by trade in live animals and the difficulties of investing in nomadic and agro- pastoral systems (FAO 1997).

The main development policies formulated during the last 15 years include The Economic Salvation Program (1990–92) and the Comprehensive National Strategy (1992–2002), but neither of these made any significant impact in the livestock sector. A more recent policy document is the Millennium Strategy for the Development of the Agricultural Sector (2003– 27) which adopts a five-year development plan (2007 to 2011). Policy priorities for livestock sector development under the five-year development plan include:

• Expansion of manufacturing of veterinary drugs and vaccines • Provision of veterinary services to nomads • Research, capacity building and genetic improvement of livestock • Rehabilitation of veterinary quarantines, slaughterhouses and tanneries • Production of baled dry fodder to ensure availability of feed during summer • Establishment of dams, hafeers and other water reservoirs for livestock • Provision of credit facilities for the public and private livestock sectors. The cost of finance (equivalent to rate of interest) will be 5% annually instead of the present 12%,

21 and the difference will be paid by the Ministry of Finance and National Economy. Credit facilities will have longer grace periods and four-year payback period. • Establishment of specialized livestock industry institutes. • Promotion of modern dairy and beef production (both for milk and meat production). • Establishment of programs to promote and develop livestock production and export. • Designing programs to develop livestock production exports. As this policy has only just been implemented, its outcomes are yet to be seen. However, at present, the performance of all public sector institutions is severely limited by lack of operating funds. At the federal level, public sector activities are confined to MARF’s seven general administration and training institutes and the Ministry of Science and Technology. At the state level, each of the 26 states has a Department of Animal Resources which fall under the State Ministry of Agriculture and Livestock.

Other government institutions that are important in the livestock export sector include the Ministry of Foreign Trade (MFT) and the Central Bank of Sudan. The MFT acts as a moderator between the private business and the government. It issues export licences and sets minimum indicative prices for export (Aklilu 2002). In 2006, the minimum export prices were USD 1400/t for beef, USD 700/t for live cattle, USD 1665/t for live sheep, USD 3750/t for mutton and lamb meat, USD 25 per head of for live goats, and USD 175 per head for live camels (meat type).

The MFT has formed export promotion councils for major export commodity groups. The Live Animals and Meat Export Promotion Council (LAMEPC), chaired by the MFT, consists of exporters, members of other relevant institutions, and randomly selected pastoralists. The council’s most important function is to enable exporters to make use of their foreign exchange earnings to import commodities or sell their hard currencies to third parties. The MFT appoints commercial attachés to key foreign trade missions to create market opportunities for Sudanese exports. In another development, the MFT, in collaboration with the Khartoum State (Ministry of Agriculture), has set up a separate livestock market in Omdurman for sheep exports. In addition, the Animal Resources Company set up el Salam market in Omdurman in 2001 under an arrangement where market fees are shared by the company (75%) and Khartoum State represented by State Ministry of Agriculture (25%).

Private sector marketing of live animals and meat is organized through a network of traders, corporate entities, brokers, agents and subagents throughout the country whose activities are guided as much by rules and regulations as by their own norms, practices and customs derived from tradition. Small public slaughterhouses cater for much of the domestic market. Two large public slaughterhouses—Kadaro and Sabalowka (at Omdurman)—and four private abattoirs—Ghanawa, Gezira International Meat Company (GIMCO), Port Sudan and Nyala— cater for the export market. Export trade is dominated by individual traders, family companies

22 and shareholding companies. Many of these have some vertical integration, with livestock buying as the first step in a business chain that includes ranching, fattening, feed milling, slaughtering and meat processing (FAO 1997).

Banking services are provided by commercial banks, which include the Animal Resources Bank that has 22.71% government shareholding but is managed as a private enterprise. The Sudanese Standards and Metrology Organization (SSMO) in collaboration with MARF issues standard specifications for meat and meat products.

3.3 Supply chains for live sheep and sheep meat

Marketing is a social and managerial function associated with the process of researching, developing, promoting, selling, and distributing a product, service, or intellectual property (Kotler and Keller 2006). A market chain is the sequence of actions necessary to take a product from raw material to a deliverable customer item. The supply chain in Sudan’s sheep subsector comprises six functional stages:

• input supply • livestock production • livestock marketing • primary processing (abattoirs, minced meat and meat preparation plants). • secondary processing • distribution Most of the production areas for sheep and other livestock species in Sudan are located far from the main consumption or export centres. Production areas and seasonal migration patterns significantly influence domestic, cross-border and formal export trade routes for livestock (Figure 4). These two factors have also led to the development of a unique internal livestock market system in Sudan (Aklilu 2002). This has resulted in a marketing chain that comprises four tiers:

• Direct sales from the farm or pastoral herd • Primary markets that handle individual or small groups of animals • Secondary markets that handle larger groups of animals • Terminal markets in large cities that represent the final point of sale for domestic consumption or export. Thus, the supply chains for live sheep and meat link producers and consumers through a series of institutions (organizations, rules and regulations) and related actors. Up to a point, elements of the chains for domestic and export markets overlap, beyond which they take different shapes and routes and involve additional actors and institutions. These are discussed below.

23 Syria Legend Lebanon Iraq Red meat export by air Live animal export by sea Official camel trade Jordan Cross border (unofficial) Israel Domestic supply route Frozen pork by sea Kuwait Libya Egypt Saudi Arabia Bahrain Qatar

U.A.E

Port Oman Sudan

Chad

Khartoum Eriteria Yemen

Bogaso Ethiopia Barbara Sudan Hargeisa Addis Ababa Central Africa Republic

Somalia

Kenya Congo D. Republic Mogadsho 0 600 1200 Nairobi Kilometres Rwanda Tanzania Prepared by PACE DMU Burundi Mombasa

Source: Aklilu (2002). Figure 4. Domestic, cross-border and official export trade routes for Sudanese livestock.

3.3.1 Producers

This analysis is based on a survey of 260 households/flocks in Blue Nile, Gedarif and West Kordofan states. Table 6 summarizes the main characteristics of households and flocks in the three states.

The market offtake rates are quite low for commercially oriented production systems, indicating that the production systems in the three states are not sufficiently commercially oriented despite the fact that flock sizes are relatively large and export of sheep and goats is a major source of foreign exchange. In this study, only 11% of the sampled households bought

24 some animals, accounting for only 2% of the overall average stock. Therefore, further analysis focused on the gross offtake rate.

Table 6. Household and flock characteristics in Blue Nile, Gedarif and West Kordofan states

Gedarif Blue Nile West Kordofan % of households by source of income Only livestock 29 52 15 Mainly livestock, minor crop 33 38 64 Mainly crop, minor livestock 18 4 14 Livestock and crop equally important 20 6 6 % of households by livestock management type Sedentary 29 28 64 Semi-nomadic 64 67 32 Nomadic 7 4 3 Average number of sheep and goats per household 152 (207) 111 (94) 77 (66) Goats as % of small ruminants 13 17 9 Inventory change for sheep and goats during the year (%) Market offtake rate 22.4 (12.4) 15.7 (9.2) 19.2 (12.2) Non-market offtake (home consumption, 5.1 (5.7) 6.0 (8.0) 9.2 (9.4) gift out, lost/stolen) Mortality 6.8 (6.5) 10.1 (7.1) 8.7 (7.0) Note: Following Negassa and Jabbar (2008) market offtake rate is defined as (sales – purchases)/average stock during a year * 100; Non-market offtake rate is defined as (slaughter + gift out – gift in + lost or stolen)/average stock * 100; Mortality is defined as the number of deaths as a percentage of the average stock. Standard deviations in parentheses. Source: Household survey data (2005).

In order to identify factors related to variation in market offtake rate, two regressions were run: the first used market offtake rate as the dependent variable while the second used the number of animals sold. The results are presented in Table 7.

The explanatory power of the variables in the offtake rate equation was quite low and only a few variables were found to have a statistically significant effect on offtake rate. Conversely, the coefficients of the several independent variables in the equation for number of animals sold were statistically significant and accounted for 74% of the variation (Table 7).

Mortality rate might, in theory, influence the number of animals sold; a lower mortality rate may imply enhanced supply while a higher mortality may result in a decrease in supply, with consequences on market offtake rate or number of animals sold from a given stock. However, neither offtake rate nor the number of animals sold was found to be influenced by mortality rate. Although mortality rate varied between households/flocks (Table 6), a regression with several combinations of factors showed that only distance to nearest clinic had a significant negative effect on mortality rate (a perverse relationship, as this would not normally be

25 expected) and no other factors, including level of expenditure on veterinary services and drugs, appeared to influence variation in mortality rate.

Table 7. Estimated coefficients and related statistics for equations explaining sales of sheep and goats Market Number of animals Independent variables offtake rate sold Intercept 26.822*** (4.103) 6.09 (20.67) State dummy (W Kordofan = 0) Gedarif –0.766 (2.601) –12.213 (13.867) Blue Nile –6.031*** (2.070) 17.181 (11.055) Livestock only or main source of livelihood 2.661 (2.385) 27.162** (12.725) (yes = 1, no = 0) Production system (nomadic/semi-nomadic = 1, 4.439** (1.971) 17.8109* (10.491) sedentary = 0) Flock size (number of sheep and goats) –0.046** (0.018) 0.628*** (0.053) (Flock size)2 5.0E–0005* (0.000) na Number of cattle and/or camels in herd –0.008 (0.022) –0.224* (0.119) Mortality rate for sheep and goats 0.083 (0.132) 0.618 (0.702) Non-market offtake rate for sheep and goats 0.024 (0.101) 0.177 (0.533) (consumption, gift etc.) Total family size 0.155 (0.165) –0.561 (0.880) Amount of crop land owned (feddan) 0.004 (0.003) 0.092 (0.015) Age of the household head 0.097 (0.112) –1.314** (0.597) Number of years of schooling –1.423 (2.475) 4.475 (13.224) Distance to nearest market –0.199 (0.395) –2.973 (2.109) R2 0.18 0.74 Adjusted R2 0.16 0.71 Standard errors in parentheses. ***, ** and * indicate significance at 1%, 5% and 10% respectively. Distance to the nearest market was not found to have a significant influence on offtake rate or actual number of animals sold. Producers sold their animals at their own premises, grazing sites (sometimes referred to as ‘bush market’) or established market places (primary, secondary or terminal markets). Theoretically, several factors could explain the choice of sales outlet. These factors include age and level of education of household head, number of adult males in the family, relative importance of livestock to the household livelihood, and the system of livestock management. A logistic regression model with these and other variables gave a poor fit. However, pairwise cross tabulations and Chi square tests revealed that only household type and buyer type had a significant effect on the choice of sales outlet. Households in which livestock are the main source of livelihood are more likely to sell their animals at markets than households that mainly depend on crops. Similarly, traders and butchers are more likely to purchase animals at markets compared to herders, farmers, consumers and bush traders.

26 3.3.2 Livestock markets

There are three types of formal livestock markets: primary, secondary and terminal/export markets. Other institutions that facilitate live animal and meat marketing are quarantines, slaughterhouses and airports facilities. However, the discussion in this section is limited to a sample of rural and urban livestock markets in the three surveyed states: 18 primary markets, 3 secondary markets and 2 terminal markets. The characteristics of the three categories of livestock markets are discussed below.

Primary markets

• Usually located within a village market or near a livestock-producing village. • Have no physical infrastructure (such as fencing, water and feed for animals) or market information. • Animals are not kept in the market overnight. • Market days are variable with some markets open once or twice a week and others operating daily. Some primary markets operate only during the wet or dry season. • Trading may be by direct negotiation between sellers and buyers or sometimes through a broker. • Except in el Showak (Gedarif State) and el Khowei (West Kordofan State) where vaccination and inspection centres are present, veterinary certificates are not issued for movement of purchased animals. Secondary markets

• May or may not have facilities and infrastructure, such as fencing, water and feed for animals. For example, these facilities are present in Gedarif and el Nihood markets but absent in el Damazeen market. • Animals are inspected by a veterinary officer and veterinary health certificates are issued. • Animals may be kept overnight in the market in holding facilities (mannama) or fenced areas. • More secure and better managed than the primary markets. Terminal markets

• Infrastructure facilities (e.g. fencing, water and feed, veterinary clinic and pharmacy, loading ramps) are in place. • Officials from the federal veterinary authority and market management are present at the market. • Some primary markets, (e.g. el Khowei in West Kordofan State and el Showak in Gedarif) also serve as terminal markets, due to the recent setting up of veterinary quarantines for export.

27 • Live sheep destined for export are inspected, vaccinated and health certificates are issued by federal veterinary authorities. Ante- and post-mortem inspections are carried out on sheep intended for slaughter. • Some terminal markets for meat are located next to export abattoirs that receive live animals directly from production areas; where live animals are supplied directly from production areas. In the three states, 40% of the primary markets open once a week, 33% daily and 12% twice a week. Secondary and terminal markets are open every day except on Fridays. Of 21 primary and secondary markets surveyed, none had holding facilities, only two secondary markets were fenced, and veterinary clinics or outposts with minimal facilities were present in five primary markets and one secondary market. The number of animals traded varies seasonally (Table 8). At el Salam terminal market, trade peaks from July to August and drops during summer (February to May).

Table 8. Number of animals traded and specialization of traders in the primary and secondary markets in three states of Sudan

Number of sheep and goats Average number of traders handling supplied/market day State Market type Sheep and Sheep, goats Peak period Lean period Only sheep goats and cattle Gedarif Primary 1142 287 0 20 18 Secondary 1950 550 0 40 30 Blue Nile Primary 232 217 0 0 18 Secondary 300 50 0 0 92 West Kordofan Primary 2205 2205 18 0 48 Secondary 5000 1950 0 0 40 Source: Livestock market survey (2005).

Sudan is currently expanding the number of its terminal markets. Livestock are now exported directly from el Muwelih in Omdurman, el Khowei, el Rahad in North Kordofan and el Showak through Port Sudan. El Muwelih in west Omdurman is the largest terminal market in Khartoum State operating on Wednesdays and Saturdays and serving both the domestic and the export markets.

3.3.3 Market actors

In general, the market chains are dominated by livestock traders and exporters who operate through a network of agents (wakil), subagents, small traders and brokers. Figure 5 illustrates a schematic diagram of the movement of sheep and goats along various market chains. Figures 6, 7 and 8 illustrate the market chains for sheep in Gedarif, Blue Nile and West Kordofan, respectively.

28 Producer Flock /herd

Ghelaja G * (Bush B trader) G

B G Primary market G G Sub-agent Sebbaba Jelaba (Local broker)B Local G B B G B sales B

Agent (Wakil) G for Local

G butcher slaughtering B Secondary market

Auctioneers B (Commission agents) B

B B

Wholesale trader/ Wholesale Terminal market exporter slaughterhouse

Live and meat exports Retailers

Consumers

G Guarantor (Damin) B Broker

Figure 5. A general schematic diagram of the sheep and goat market chain in Sudan.

The supply chain is characterized by many intermediate stages, with transaction costs being taken up mostly by intermediary traders and brokers (FAO 1997). Most trading is done by private treaty, with the exception of large numbers of sheep intended for export which are sold by private auction at primary, secondary or terminal markets. Resale in the same market on the same day is common, and animals may be fattened or reconditioned before resale. The following descriptions of the various market intermediaries are based on surveys carried out in 2005–06 and personal observations. For more details, see el Dirani (2007).

29 Meat export Live sheep export

Export slaughterhouses Omdurman Port Sudan 1- Kadaro slaughterhouse terminal and Sawakin markets quarantine 2-Ghanawa slaughterhouse

El Showak vet. inspection center

Gedarif secondary market

Elmagata El Hawata Bazoora Abu Rukhum El Shwak primary market primary market primary market primary market primary market

Gadorra , Kamer Village producers Mountain area, Geteifa Elhoge Wed El Heleo, Bazoora Beshir, El Hoge Tineidba Gedaref El magata

Figure 6. Sheep marketing channels in Gedarif state.

Ghelaja (bush traders): These agents purchase animals directly from producers at grazing areas, villages or primary markets and sell the animals to local brokers (sebbaba) at primary markets. Their revolving funds for purchases do not normally exceed SD 100,000 (USD 435), enough to buy only about 10 sheep.

Sebbaba (local brokers): There are three categories of sheep sebbaba in Sudanese livestock markets, according to the roles they play in the transaction. The first category of sebbaba purchases sheep either from ghelaja or directly from producers at the primary market. They then sell the animals either at another primary market or at a secondary market. Their capital is about SD 500,000 (USD 2174). Although they are called ‘local brokers’, they are also traders in the sense that they purchase animals from one market and sell in another market or in the same primary market. However, at the primary markets they are called sebbaba because they mostly act as brokers and act as a link between buyers and sellers.

30 Meat export Live sheep export

Export slaughterhouses Omdurman Port Sudan 1- Kadaro slaughterhouse terminal and Sawakin markets quarantine 2-Ghanawa slaughterhouse

Damazeen Medani secondary (Gezira State) markets

Boought Aboghmy Badows Ofod Wadabook primary market primary market primary market primary market primary market

Hamada, Wadabook, Faloge Teira, Dendena, Nomadic Local producers (U.Nile) Absheneina, Khor Shanfoor, Forgan, and nomads Karo (U.Nile), Ofod, Khor Elkarori, Sibelhab, Elgamam, Makho Nomads Wdkhoty El Banshory

Figure 7. Sheep marketing channels in Blue Nile state.

Meat export Live sheep export Port Sudan Export Slaughterhouses Omdurman and Sawakin 1- Kadaro slaughterhouse terminal Quarantine markets 2-Ghanawa slaughterhouse El Khowei Vet. Inspection Ghibeish Center secondary market El Nihood El Obeid Eyal Bakheit sec. market Kosti primary market secondary sec. market market

El Migesim Shalota Morkab Om khirein Ankowsh El Khowei primary market primary market primary market primary market primary market

Nomadic Khamas (Elzeleita, Nomadic Ghibeis, Ghibeish, Fareigh Elhagar), Om El Fareigh N & S, Darfur, El Nihood, Bedri, Wed Benda, El Maroob, local producers El Nihood local producers

Figure 8. Sheep marketing channels in West Kordofan state.

31 The second category of sebbaba operates at primary, secondary or terminal markets. They are classical brokers or typical middlemen involved in all transactions between sellers and buyers along the market chain. The majority do not have working capital and are paid a commission based on the number of animals or herds handled.

The third category of sebbaba is also called kaggir. These brokers buy animals at a nominal fee or acquire the animals without paying a fee. Transactions by this category of brokers are relatively fewer and account mostly for domestic demand.

Jellaba (suppliers): They purchase animals from remote production areas and bring them to the terminal markets for live sheep export. They may work in partnership with sheep exporters and wholesalers. They are speculative traders who buy and sell livestock with the main aim of profiting from price fluctuations.

Damin (guarantor): The damin provides a guarantee to the buyer that animals offered for sale are not stolen and that the seller is known by tribe. Each tribe has a guarantor. They are present in all livestock markets in the Sudan with high concentration in production areas. They also provide services for livestock owners, providing credit for managing and accommodating animals, and sometimes advice producers as to whom they can sell on credit basis. To operate in the market, they must have a valid licence from local authority. They charge a fee of SD 100 per head (USD 0.4).

Wakil (agent): Agents act only as representatives of their clients; they do not own the animals they handle. They receive their income in the form of fees and commissions and provide services to buyers and sellers. Often, the main service they provide is market information and the linking of buyers and sellers.

Dallallein (auctioneers): They arrange for terms of sale of the animals, receive the payments, deduct their fees and transfer the balance to the owners. They influence the supply of sheep to Omdurman terminal market and the price determination. At secondary markets, they have the same function, but with relatively less influence. The role of the different actors in the livestock market chain is summarized in Table 9.

32 Table 9. Livestock market actors and functions by type of market in the Sudan

Type of market Market actors Function Primary Producers Sell, purchase and resell Ghelaja (bush traders) Sell, purchase and resell Local butchers Purchase for local slaughter Wakil (agent/subagent) Purchase for export Jellaba (suppliers) Purchase and assemble Sebbaba (local broker) Purchase, sell or mediate Brokers (semsar) Commissioned middlemen Secondary Local butchers Purchase for local slaughter Wakil (agent/subagent) Purchase for local slaughter and/or export Jellaba (suppliers) Sell/or purchase and assemble Sebbaba (local broker) Purchase, sell or mediate Brokers (semsar) Commissioned middlemen Terminal Local butchers Purchase for local slaughter Wakil (agent/subagent) Purchase for sheep export Jellaba (suppliers) Sell for domestic consumption export Brokers (semsar) Commissioned middlemen Sebbaba (local broker) Purchase, sell or mediate Small traders Purchase and sell to big traders/consumers Big traders Purchase and sell to live sheep exporters Big auctioneers Sell to live sheep exporters Source: Adapted and modified from Solomon and Nigussie (www.fao.org/wairdocs/ilri/) by el Dirani (2007).

3.4 Physical movement of traded sheep from producers to market outlets

The pattern and mode of movement of sheep from production areas to domestic or export market outlets depends on the season and the age, sex and condition, and quality of the animals. In the Sudan, livestock are mostly transported by road in trucks, rail, trekking on hoof or by boat. The road and railway networks are relatively well established throughout the country. The paved road from el Nihood through el Khowei to el Obeid is connected to Omdurman and Port Sudan and Sawakin (export outlets). However, the high cost of transporting animals from production to consumption areas by road or rail is still one of the major constraints facing the sheep industry, occasioned by the high cost of fuel. The lowest cost option for livestock transport is by trekking the animals during winter or the rainy season, but not in the dry season when there is high mortality and weight loss. Improving the railway infrastructure by introducing additional power locomotives and double deck wagons would help to enhance the supply of animals from production areas to markets.

33 3.5. Quality and safety assurance system for export trade

The quality assurance activities in the export chains for live sheep and lamb are shown in Figures 9 and 10, respectively.

Current activities, arrangements Stages from production and requirements to export market

Import regulations and specifications

inspection, Brucella test, clearance Jeddah (Saudi Arabia)

Inspection, Brucella test, clearance Loading of sheep inside or rejections of sheep at Jeddah port vessels, during sea trip and by Saudi veterinary authorities before unloading at Jeddah

Vet. quarantine measures at Port Road or rail transport from Sudan and Swakin. Rejection by secondary quarantines to terminal quarantines at Port federal vet. quarantine authorities Sudan & Swakin

Codex Alimentarius, OIE, FAO/WHO and HAACP requirements with appropriate El Kadaro Quarantine

facilities implemented by trained (Khartoum State) veterinarians and staff with quarantine measures

Seasonal variation in supply of appropriate type Completion of sheep purchases of sheep due to differences in quantity and quality from Omdurman and of stored feed. Quality control in compliance with commencement of feedlotting to Codex Alimentarius. Control around feedlots; avoid weight loss and attain transport to abattoir by truck or trailer standard requirements for export (health, weight and quality)

Entry into secondary quarantine facilities; inspection of notifiable and non-notifiable Short-term inspection and diseases or uncastrated males; vaccination; vaccination (secondary Brucella testing and certification; rejection quarantine); trucking to of unfit animals for export. Certified Port Sudan animals ear-tagged for export

Purchase of stock from Pre-purchase: Identification and commercial herds or local traders, selection of quality (breed, weight, or through agents from nomadic age, sex) and inspection for diseases camps or primary markets; to fulfil Saudi Arabia certification animals trekked on hoof to requirements inspection centres (with quarantine facilities)

Figure 9. Quality assurance activities in the Sudanese live sheep export chain.

34 Current activities, arrangements and Stages from production to requirements export market

Import regulations; inspection and Buyers in Saudi Arabia (private clearance; customs, taxes and fees; companies, agencies, seasonal changes in demand supermarkets, hotels, restaurants)

Refrigerated trucks; thermo king switched on one hour before loading. Unloading of carcasses at the airport into containers for Transport by road in transport; chilling capacity at port; veterinary refrigerated trucks from inspection; clearance at Khartoum airport abattoirs to Khartoum airport scheduling of direct flights and ensuring product is delivered at the required temperature Export abattoirs: Halal slaughter, skinning, evisceration, washing, SPS, HAACP; appropriate facilities, inspection (ante mortem equipment; trained staff for slaughter and examination), chilling for 24 meat inspection. Packaging with cotton hours, re-inspection, labelling, wrapping; adequate chilling facilities and packing and loading slaughtering capacity

Seasonal variation in supply of high Feedlot—additional quality lambs; requirements for buffer concentrates to reach export areas and animal control; transport of market requirements for animals to abattoir by road (truck, lorry weight and quality required or trailer) to meet SPS certification

Ante mortem inspection for diseases, Short-term quarantine inflamed lymph nodes, wounds, fractures and full screening for and parasites; weight and body condition diseases as ante mortem that meet health certification examination prior to requirements slaughtering

Pre-purchase inspection for Purchase of Purchase from diseases and parasites; weight sheep from markets and and condition to meet SPS suppliers at the transport to certification requirements by slaughterhouse short-term traders (market actors) and premises quarantine state veterinary authorities facilities

Figure 10. Quality assurance activities in the Sudanese lamb export chain.

35 3.5.1 Quality indicators at producer level

Most producers offer sheep for sale to meet their urgent needs at any time during the year. Some producers have started to supply sheep according to seasonal variation in demand and select the appropriate type of sheep according to function (Hajj, Ramadan or vacations). Although they are not market oriented and do not produce for the market, yet they select from their herds based on their need for money, and the type of demanded animal. Recently, some producers of sheep in Kordofan have developed the system of purchasing small lambs (50–100 animals at a time), maintaining them for 2–4 months within the breeding herd and offering them for sale. Some of them are self-financed (usually by selling culled stocks), others by obtaining loans from traders (and sharing 50% of the profits).

Animal characteristics in terms of health, quality, safety, productivity and other criteria required by importers are well known to traders and exporters and less so to producers, who get information on demand characteristics from the traders. Sheep meat exports to the Middle East from different countries, except Sudan, have historically been in the form of frozen carcasses. With improvements in technology, the market now expects chilled lamb cuts and carcasses for the growing food industry, restaurants, and retail sectors. The Middle East markets have a preference for sheep carcasses in the range of 8 to 12 kg carcass weight, because of a perception that the smaller the lamb, the younger the animal. As for live sheep, the local sheep breeds in Saudi Arabia—the ‘fat tail’ Harri, Nagdi and Awassi sheep—produce light and lean lamb carcasses that are considered to be of highest quality and so receive the highest prices in the market. Saudi market has a preference for Sudanese live sheep within the range of 35 to 45 kg live weight. The best quality is demanded mainly during Hajj and for religious purposes and the second-best quality is demanded throughout the year. The animals should be no more than three years of age (three pairs of permanent incisor teeth) unless otherwise specified in the import permit.

Exporters reported that lamb meat quality indicators preferred by Saudi importers are age from 4–6 months and up to 12 months, weight range between 9–12 kg carcass weight, wide chest and fat. Sometimes, importers request heavier weight range of 18–21 kg carcass weight. The carcass should not have contusions or spots, should be white (marbling appearance), labelled with date of slaughtering, stamped and wrapped in light cotton cloth.

Against the above requirements and preferences in the Saudi market, the type of sheep and sheep meat available and supplied by producers and traders in the Sudanese market are described in Table 10. There are three different qualities of live sheep differentiated by breed (or type, as scientific classification of breed is often absent but animals have local names recognized in the Saudi market), live and carcass weight, and best quality sheep meat is defined by carcass weight, fatness and compulsory halal slaughter.

36 Table 10. Quality indicators of Sudanese live sheep and sheep meat for export

Products Quality indicators High quality live sheep 1. (a) Desert or pure breed animal (Hammari, Kabashi, Zaghawi, Meidoub, Wateish, Rofa’a, Ashgar, Butana, Dubasi) (b) Heavy weight (45 kg live weight, 17 kg and above carcass weight) Medium quality live 2. (a) Cross breeds (Desert × Nilotic) × Desert = Shawrani; Desert × sheep Zaghawi = Shawrani) (b) Medium weight (35 kg live weight, 13–16 kg carcass weight) Low quality live sheep 3. (a) Cross breed (Garage : Baggara type) (b) Light weight (25 kg live weight) High quality lamb meat 4. Halal meat, fat carcass, 11.5–12.5 kg carcass weight, removal of specific parts. Three types are identified: i) fat and lean; ii) freshly killed and chilled; iii) importing country consumers’ preference demand Source: Traders survey data (2005).

The three states surveyed in this study supply several breeds preferred in the Saudi market as described above. For example, Hamari is the most common breed in West Kordofan, White is the dominant breed in Blue Nile, and Abrag and Ahmar are the dominant breeds in Gedarif (Table 11). It should be recognized, however, that some breeds or types of sheep may be found in more than one state and some breeds/types move across states due to seasonal migration or due to location of a major primary/secondary market whose supply hinterland goes beyond state boundary. Therefore, absolute dominance of a breed in a state may not be permanent during the whole year, though a breed /type might have originated in a specific state. For example, Ghebeish livestock market in West Kordofan is considered to be number one and most famous primary market in the Sudan for Hamari sheep, dominant breed in the state, but the market also receives other breeds or types such as Zaghawa sheep, called locally as Showrani from East and North Darfur States.

Table 11. Dominant sheep breeds (or types) in three states of Sudan Rank of available sheep breeds in each state Local name of breed Gedarif Blue Nile West Kordofan Hamari – – 1 Abrag 1 3 – White 2 1 5 Ashgar 2 4 3 Ahmar 1 2 – Kabashi – – 2 Asfar 3 4 – Zaghawa – – 4 Garage – – 4 Note: White is also called Wateish, Rofa’a, Shebeilat, Kenana; Abrag is also called Musalami, Dubasi; and Ahmar is also called Kenana. Source: Traders survey data (2005).

37 Apart from breed, sex, weight, and colour, the other most important quality criteria are related to health and diseases. Although Sudan has a disease free zone in the north of the country, incidences of some diseases, especially trade related (transboundary) diseases are high in some production areas that supply export animals. Village and household/flock level surveys in the three states provided data for incidences of diseases and mortality for 2003–05. The following patterns in disease incidence emerged from responses of sample producers.

First, in group interviews in village level surveys, sheep pox, PPR and heartwater and poisoning were reported as the most important diseases in the past three years (2003–05) prior to the survey (Mohammed 2006).4

Second, flock/household level surveys showed that in each state, predominance of diseases varied between years (Figure 11). In Gedarif state, sheep pox, PPR and heartwater were the most important diseases in 2003, 2004 and 2005 respectively. Incidence of sheep pox declined but that of heartwater increased over time, while incidence of PPR increased in 2004 then decreased in 2005. In Blue Nile, incidence of sheep pox declined over time and that of PPR increased, but incidence of heartwater remained stable at a lower level in all the years. In West Kordofan, incidence of sheep pox declined slightly over time from a high level, while the incidence of poisoning was very important and incidence of pneumonia increased in 2004 and 2005. The incidence of major diseases was higher in the dry season (Figure 12). Also there was difference in the incidence of diseases according to system of management of flocks. Among the sedentary flocks, incidence of major diseases was evenly distributed. Among seasonally migrant flocks, PPR was the most important disease, followed by heartwater, then sheep pox. Among nomadic flocks, sheep pox, PPR and poisoning were major diseases.

Third, CCFR was very high in case of all the four major diseases—sheep pox, heartwater, PPR and poisoning—and they varied between the years (Table 12). CCFR was higher among goats than sheep in case of PPR and heartwater.

Fourth, as the reported incidences were based on local names or symptoms, so there was room for error in reporting and recording disease names. In order to validate the reported incidences, serum samples were collected from small ruminants from selected flocks in the survey areas to test incidence of heartwater and PPR. Results of serum analysis for heartwater conducted on samples from 320 animals showed that 98%, 93% and 12% of the animals tested positive in Gedarif, Bluer Nile and West Kordofan. In case of PPR, 600 serum samples were tested, and respectively 29%, 69% and 68% of samples in Gedarif, Blue Nile and West Kordofan tested positive. Sero-positve cases were higher among goats than sheep,

4. In village and flock level surveys, reported diseases were recorded on the basis of local disease names or symptoms mentioned by the respondents and later converted into standard scientific names by the survey enumerators on the basis of guidance on equivalent chart. The local names are given in Appendix 1.

38 indicating that goats were more vulnerable to these two diseases than sheep. Thus, even though the reported and serum tested figures for incidences were not exactly the same, the serum tested figures are quite close to the survey results for PPR and heartwater, which confirms observation of Mariner and Paskin (2000) that farmers are a rich source of practical agricultural knowledge and the extent of knowledge is usually related to the degree of economic dependence a society has on that activity (Mohammed 2006). The validation tests also confirmed that surveys could generate fairly reliable statistics on disease incidence in a short period when lack of time and resources may not permit collection of serum samples and conduct rigorous laboratory tests.

Gedarif State Blue Nile State Percentage 60%

51.40 Percentage 50% 70% 64.20 43.60 60% 40% 39.30 50% 46.0

30% 40% 36.00 22.80 21.40 30% 20% 17.90 17.9 17.10 22.00 15.40 20% 12.00 10% 10.70 11.30 10% 5.70 2.90 0% 0% 2003 2004 2005 2003 2004 2005 Year Year

Heart water PPR Sheep Pox Heart water PPR Sheep Pox

West Kordofan State Percentage 60% 53.60 50%

40% 33.0 31.5 28.90 30% 28.3

20% 17.9 17.4 16.5

10% 1.80 0% 2003 2004 2005 Year

Poisoning Pnenmonia Sheep Pox

Source: Mohammed (2006) based on producer survey 2005. Figure 11. Incidence of major diseases in three states of Sudan, 2003–05.

39 Frequency

120

100

80

60

40

20

0 Dry season Rainy season All year Season

Heart water Pneumonia Poisoning

PPR Sheep Pox Source: Mohammed (2006) based on producer survey 2005. Figure 12. Seasonal incidence of major diseases in three states of Sudan, 2006.

Table 12. Crude case fatality rates for diseases reported by household respondents in Sudan as important during 2003–05

2003 2004 2005 Diseases No. of animals No. of animals No. of animals CCFR % CCFR % CCFR % affected affected affected PPR 635 35 3160 48 4400 34 Sheep pox 2845 24 2694 26 2969 40 Heartwater 167 42 522 34 1886 40 Foreign body 31 52 0 na 22 82 HS 15 100 175 44 177 64 Botulism 40 70 75 65 20 65 Arthritis 0 na 35 63 2 0 Diarrhoea 94 96 94 96 108 57 Poisoning 301 60 692 83 289 84 Mastitis 20 0 107 61 0 na Avitaminosis 0 na 5 0 100 60 Pneumonia 63 24 59 12 222 41 Nonspecific 248 17 70 67 38 92 Total 4459 30 7688 43 10233 39 CCFR: crude case fatality rate; HS: haemorrhagic septicaemia; PPR: peste des petits ruminants. Source: Mohammed (2006) based on producer survey 2005.

40 A major reason for high incidence of diseases and high mortalities, especially fatalities in case of major diseases, is poor use of veterinary services. A summary of responses of the sample producers on their felt need for veterinary services and actual use of services from various sources is given in Table 13. In all, 60% of the sample households felt the need for any veterinary services once or more times during the year prior to the survey, but only 44% actually used any services from one or more sources one or more times. Only 31% of the entire samples used government veterinary services, 10% used private veterinary services, 16% depended on the prescription or advice of drug sellers, 3% used the services of community animal health workers (CAHW), and 10% used traditional medicine. Apart from seeking the services of others, 93% of the sample households themselves prescribed drugs and bought from the market. The average frequency of self-prescription was about three times more than services sought from other sources. Sixty-two percent of the sample households felt that they had enough knowledge and experience to prescribe drugs themselves for their animals, a situation that needs careful consideration as indiscriminate and improper use of drugs may create long-term problems for overall disease management and treatment of diseased animals in the country.

Table 13. Proportion of sample households in Sudan according to use of veterinary services from different sources during the year prior to the survey % of sample households by number of times a service was used 0 1–3 4+ All Felt the need for any veterinary service during the past year 40 44 16 100 Actually used veterinary service from a source 56 34 10 100 Used government veterinary service 69 29 2 100 Used private veterinary service 88 8 4 100 Subtotal government and/or private veterinary service use 63 29 8 100 Used drug sellers’ advice 84 10 6 100 Used community Animal Health Workers 97 2 1 100 Subtotal paravet or dug seller use 83 10 7 100 Used traditional medicine 90 8 2 100 Used own prescription 7 24 69 100 Source: Household survey data (2005).

Among the three states, the extent of use of veterinary services was significantly higher in Gedarif and Blue Nile than in West Kordofan. The extent of use was also higher (not statistically significant) among households with mainly crop or crop and livestock as equal source of livelihood compared to households with livestock as the only or main source of livelihood. Extent of use was higher among sedentary households (not statistically significant) compared to nomadic and semi-nomadic households but there was no significant difference between households who sold animals at a market place compared to those who sold in the village or camp.

41 A major reason for low use of professional veterinary services is poor access to personnel and facilities as indicated by distance of facilities from households and one way travel time by the fastest or most common means of travel (Table 14). For example, the nearest veterinary health outpost or veterinary assistant is over 40 km away for about 50% of the sample households in Gedarif, 27% in Blue Nile and 33% in West Kordofan. Most of these facilities are also managed by inadequate number of staff, with poor qualifications. For example, in Gedarif, out of 150 staff, 32% have a graduate or above degree, 13% have a diploma or certificate and 55% are CAHW with short-term training. For Blue Nile, out of 76 staff, 34% have a graduate or above degree, 15% have a diploma or certificate and 51% are CAHW with short-term training. So each staff has to cover a large area and large livestock population. For example, in Gedarif, each qualified veterinarian with a diploma qualification or higher covers 1123 km2 and 41,269 head of ruminant livestock (sheep, goats, cattle and camel). The corresponding figures are 502 km2 and 18,433 head of animals if CAHW are also added to the staff list. In Blue Nile state, each veterinarian covers 1719 km2 and 156,378 heads of livestock, and the figures are 1111 km2 and 90,535 head of animals when CAHW are added to staff list. The situation in West Kordofan is even worse. These staff : animal number ratios are too unfavourable when compared to the recommended ratios of 30,000 head of animals per qualified veterinarian for developing countries (WHO/FAO 1965 quoted in Hassan 2006).

Table 14. Average distance and travel time to neatest veterinary facilities from households/flocks in the three states of Sudan Gedarif Blue Nile West Kordofan Nearest health facilities from Travel Travel Travel Distance, Distance, Distance, household/flock time, time, time, km km km hrs hrs hrs Health outpost or veterinary 39 (23) 1.3 (0.9) 29 (40) 3.1 (6.1) 33 (27) 2.3 (3.1) assistanta Veterinary clinic with 41 (24) 1.4 (0.8) 73 (55) 3.6 (4.9) 35 (27) 2.3 (3.1) qualified veterinarianb Diagnostic laboratoryb 67 (54) 1.8 (1.1) 98 (53) 4.1 (4.6) 134 (29) 2.9 (1.3) Drug store 35 (25) 1.7 (2.9) 41 (51) 2.7 (4.6) 34 (26) 2.1 (2.6) Figures in the parentheses are standard deviations. a. Travel time is one-way. b. Average travel times in the three states are significantly different at <10% level. Both differences in average distances and travel times between the three states are significantly different at <2% level. Source: Producer survey data (2005).

Estimated losses due to diseases, taking into account morbidity, mortality and cost of preventive and curative treatments of affected animals, amounted to SD 176,276 (USD 766) per household per year for the entire sample, equivalent to the market value of about 10–14 head of sheep, which is quite large for many households whose livelihood depends on such animals. Of the total loss, 74% occurred due to the loss of animals and 18% due

42 to cost of veterinary services and drugs (Table 15). Of the overall loss, 21% occurred due to PPR related causes, 10% due to heartwater related causes and 69% due to other diseases. The overall consequence of diseases and health costs was reduced supply of better quality animals in the export market.

Table 15. Value of losses per household per year (2003–05) due to livestock diseases in Sudan

Loss due to all diseases Causes of loss Value (SD) % Value of dead animals 129,976 74 Value of production loss (milk, weight loss, lower sale value) 14,551 8 Cost of drugs, vaccines and vet services 31,749 18 Total 176,276 100 Note: USD 1 = SD 230. Source: Producer survey data 2005.

Results of the best-fit equation to explain variation in the level of expenditure on veterinary services and drugs are summarized in Table 16. The significant negative intercept of the equation is consistent with the fact that over 60% of the households did not use any professional veterinary service, though some of them might have incurred some cost through buying self-prescribed drugs. There was no significant difference in the average level of expenditure per household between the three states, between households with livestock as the only/major or minor source of livelihood or between systems of production. Level of expenditure increased significantly with the proportion of household income derived from livestock, with increase in the size of flock, with longer distance to the nearest drug store, with increase in the number of times drug was purchased on the basis of self- prescription, and with increase in the number of times professional veterinary service was sought. Theoretically, livestock as a source of livelihood, flock size and rank of income from livestock could be correlated, but they were not in this sample. Alternative specification of the equation excluding one or two of these three variables worsened the model fit, so the estimated coefficients in the best-fit equation are considered unbiased.

3.5.2 Quality indicators at markets

The different health, safety and quality criteria the traders consider when purchasing sheep and goats are basically to avoid diseased animals as reported by 21% of traders at primary market level and 38% at secondary market, and they select fat animals as reported by 44% at primary market level and 34% at secondary market level (Table 17). Collection of information from market managers including veterinary inspectors, revealed that most common diseases for which animals were barred from sale by veterinary inspectors at the primary and secondary markets in the three states are heartwater, PPR, jaundice, sheep pox, severe emaciation, pneumonia, generalized mange, trypanosomosis, and recently foreign

43 bodies in heavy export quality sheep—especially in West Kordofan State (Table 18). At el Salam terminal market in Omdurman (Khartoum State), diseased animals (such as these having emaciation, diarrhoea, pneumonia and severe cases of mange) are usually bought by specialized traders. They cure and fatten them for reselling in the terminal market. Thus major diseases for which animals are screened at various points in the market chain are also the major diseases prevailing at the producer level. In addition to diseases, other physical conditions and criteria are used to screen animals in markets to assure quality and safety.

Table 16. Estimated coefficients of variable explaining level of expenditure on veterinary services and drugs in the three states of Sudan (using GLM procedure in SPSS)

Independent variables Estimated coefficients Intercept –66231.70** (2972.96) State dummy (West Kordofan = 0) Gedarif 15740.43 (14067.66) Blue Nile 3458.31 (11698.11) Livestock only or main source of livelihood (yes = 1, no = 0) 16179.10 (13056.61) Production system (nomadic/semi-nomadic = 1, sedentary = 0) –13465.36 (11024.68) Rank of livestock in total household income 4447.28** (2229.684) (highest score = 10 when livestock is the only source) Flock size 198.961*** (52.882) Distance to nearest drug store (km) 321.629* (189.273) Have enough experience to prescribe/buy drugs yourself 18958.79 (21639.29) (yes = 1, no = 0) Number of times drugs bought on own prescription 1578.646*** (546.143) Number of times professional veterinary service used in the year 2932.387** (1568.059) Number of times paravets service used in the year –482.405 (1455.071) Distance from household/flock to the nearest health –113.377 (4465.475) outpost/veterinary assistant (9 km) Distance from household/flock to the nearest veterinary clinic (9 km) –207.980 (425.266) Age of household head (years) 2414.314 (3815.226) Years of schooling of household head 787.964 (12964.39) Land ownership (feddan) –14.790 (14.603 R2 0.41 Adj R2 0.33 Figures in the parentheses are standard errors. ***, ** and * indicate significant at less than 1, 5 and 10% level.

At all market levels, about half of the traders (43–57% in the three states) do not target any specific breed for purchases, while the other half target specific breed(s) for purchase. This is so even at terminal markets, although at that stage sufficient screening should have occurred for traders to target animals of specific characteristics for export. The reason this does not occur is explained by the fact that when traders fail to get their animals accepted by exporters, they sell them at the domestic market, primarily in Khartoum, which is quite large.

44 Table 17. Distribution of traders according to health, safety and quality criteria they consider at primary and secondary markets in Sudan when purchasing sheep and goats, especially for export market

% of traders Type of market Safety and quality criteria used by traders in purchase decisions reporting Primary Selection of fat good general health and not emaciated 44 Avoid animals with Pox, PPR, Fascioliasis, abscesses, 20 sheep pox, mange, heartwater Avoid unhealthy, should be disease free 13 Avoid cough and pneumonia 10 Avoid jaundice disease 3 Palpation points for fatness; tail, chest, back 3 Purchase clean smooth glistening hair not rough coat (rough 7 coat is a sign of internal parasites) Total 100 Secondary Disease free and eliminate diseased animals, avoid abscess 38 Select fat and good shape animals, good general health 34 and appearance condition (active) Avoid mange, sheep pox, free from foreign bodies (Omderradim) 11 Export market standards, pure breed and fat sheep, red or 16 Ashgar coloured sheep, smooth hair coat, select 12 kg carcass wt. Total 100 Source: Traders survey data (2005).

Table 18. Rank of most common diseases for which animals were barred by veterinary inspectors from selling at the primary and secondary markets in the three states of Sudan as reported by traders

Rank by State Diseases Gedarif Blue Nile West Kordofan heartwater 1 1 3 PPR 1 2 – Jaundice 2 2 – Sheep pox – – 1 Emaciation – 4 1 pneumonia 3 3 2 Foreign body – – 3 Trypanosomosis – – 3 Mange – 4 3 Source: Livestock markets survey data (2005).

There is specialization in trade activities in the markets in three states. Some traders purchase small lamb of 11.5–12.5 kg carcass weight or the slaughter type of sheep for lamb meat export. Others specialize in live sheep for Hajj export of 13–16 kg live weight. Final category of traders is the non-specialized group; they prefer to purchase all ranges of weight (Table 19). It appears that about half of traders in West Kordofan are specialized in the 17 kg and

45 above (for live sheep export ), Gedarif in the slaughter sheep meat export of 11.5–12.5 kg carcass weight and Blue Nile in all ranges of weight. When preferences of traders in primary and secondary markets are compared, it appears that 43% of primary market traders buy animals of all weight ranges, while 31% of secondary market traders do so; other traders buy animals of specific weight. This means that screening of animals for specific characteristics is less prevalent at the primary market and screening gets tighter at higher points in the market chain, which would be normally expected.

Table 19. Preferred sheep weight by traders for their purchases (in kg carcass wt) in primary and secondary markets in three states of Sudan

% of traders with preferred sheep weight (kg carcass weight) State 11.5–12.5 kg 13–16 kg 17 kg and above All ranges of weight Total Gedarif 50 19 19 12 100 Blue Nile 24 19 9 48 100 Western Kordofan 5 21 42 32 100 Source: Traders survey data (2005).

Well-established traditional exporters tend to purchase and manage animals through three channels. The first channel involves purchase of mature stock, either from commercial herds or from local traders or collection through agents from nomadic encampment or primary and secondary markets. The second channel involves purchase from Omdurman terminal market, either ready for shipping or needing few days for finishing. The third channel involves purchase by a system called Tabbieet (or keeping animals for more than one season). There are two categories of sheep handled by Tabbieet: the first is the purchase of young lambs (4–6 month of age) at a very low price after the rainy season and keeping them for 6 months at the natural grazing areas, then exporting them. The second type of purchase is the emaciated sheep but otherwise fulfilling other export quality criteria, during the dry season and keeping them till the rainy season. Exporters’ arrangements are basically to fulfil the importers seasonal demand as shown for 2004 in Figure 13. The peak season usually occurs from December to March. 3.5.3 Inspection and certification for quality assurance

Different levels and actors are involved at various points in the export chain from primary market up to the port in Saudi Arabia for inspection and selection for quality assurance and certification for live sheep export. At each level, there is inspection and selection criteria, indicated in terms of phonotypical characteristics of sheep, diseases related requirements and regulatory requirements (Table 20). For meat export, Khartoum airport and any other export ports for meat (e.g. Nayala), export slaughterhouses, inspection and vaccination centres are involved in addition to inspection at livestock markets. There are two major bodies through which inspection and selection for quality assurance and certification of export sheep is

46 performed. The first is the exporter (a private sector enterprise or a company). The second is the Federal Ministry of Animal Resources and Fisheries (General Department of Quarantines and Meat Hygiene) playing its role through inspection and vaccination centres and veterinary quarantines.

Numbers in heads 450,000

400,000

350,000

300,000

250,000 200,000

150,000

100,000 50,000

0 July May June April March August January October February December November Months September

Source: Ministry of Animal Resources and Fisheries. Figure 13. Monthly live sheep exports from Sudan (2004).

The export enterprises or companies provide quality assurance through a number of steps and actions.

First, they screen animals at the time of purchase on the basis of a number of criteria. The purchase team observe and inspect animals individually by visual assessment (the action for inspection and individual observation is called Yarrigh) to avoid the following: garage (inferior quality), over aged (full permanent teeth > 4 years) or uncastrated, enlarged lymph nodes and abscesses, mange on nostrils or anywhere, infected wounds, scratches, diarrhoea, or any disease which cannot respond to fast treatment, or will leave a scar on the body, phenotypical abnormalities on sheep body or its limbs, and finally isolate females (ewes) immediately when observed.

47 Table 20. Inspection and selection criteria for quality assurance and certification of Sudanese sheep exports at different points in the export chain

Inspection/selection criteria Regulatory requirements Disease related requirements Phenotypic characteristics Port Sudan and Sawakin Port for live sheep

1. Veterinary inspectors Veterinary authority in quarantine to 1. Veterinary inspectors issue international health ensure completion of quarantine period. isolate emaciated and small certificates endorsed by Veterinary inspectors with technicians animals higher veterinary official perform inspection and checking four 2. Exporters’ agents 2. SSMO issues quality times, at entrance and departure of quar- perform their own certificates for sheep antine premises. During entrance to sea judgment in isolating port prior to weighing and during loading unsuitable quality inside vessels

Saudi Arabia ports

1. During Hajj 1. Healthy and fulfilling veterinary 1. Slaughtered by Muslims a. Healthy and fat requirements (vaccination and testing and approved by accredited for Brucella ovis). This includes a list of certifying authorities (certi- b. No abnormalities or epidemic and contagious diseases from fied Halal meat) deformities which livestock must be free 2. Must have the following c. No tail docking 2. Imported animals are subjected to documents: d. No ear cut more than one-inspection at the major ports of entry and a. Authorized certificate of third health checks on every animal are very origin authenticated at the rigorous. Both physical and laboratory Saudi diplomatic mission e. Not less than six months tests are performed old and local chamber of com- merce f. Average live weight 35 to 45 kg; all colours b. Authenticated invoice (in triplicate) stating the country 2. Rest of the year of origin, name of the car- a. Should be under 3 years rier, brand and number of of age. goods, along with a descrip- b. Castrated males tion including weight and value; a packing list c. Preferred colour is red or brick, but not white or black c. Bill of lading d. Documents indicating compliance with health regulations

Source: Ministry of Animal Resources and Fisheries.

Second, further screening on the basis of health specifications and indicators of good quality. The most important instruction guide here from exporter is to avoid purchases from infected areas or markets with diseases that affect the export flow. After the first visual assessment if inflamed lymph nodes exceed 5%, there should be individual checking of all animals in the flock when large numbers of sheep are offered for sale (e.g. 2000 to 5000). In inspecting inflamed lymph nodes, certain locations on the body should be considered, e.g. on the head (sub-mandibles), in front of the fore legs (supra scapular), genital organs, or any abnormal

48 apparent swelling on the body. The degree of good quality animals is indicated by the degree of fatness visually assessed, and a flock is usually considered of good quality if 85% or above of the flock is composed of fat animals. Another selection criterion is the colours preferred by the Saudis, which are red, brick, white and red; avoid colours which are not demanded, like black or white and black.

Third, special arrangements are made before purchases, such as the selection of a collection centre with water and pasture, away from agricultural crops and farms, to safeguard against weight loss, selection of good shepherds and drovers (honest and experienced) to take care of animals, provision of some essential veterinary drugs to deal with problems while on the road or on transit.

Fourth, use price as an indicator of quality. The purchasing team or purchasing officers should be acquainted with the cost of export quality sheep, from purchase area to export market, and the expected revenue after considering mortality and rejections. They should be acquainted with the prevailing prices in the supply hinterland, and also with supply and demand and movements of commercial flocks, the presence of other traders and their intentions and purchase policy, and to treat competitors wisely.

Fifth, accountability of the purchase team for delivery of quality animals. Purchasing team should be very strict in obeying the company instructions, especially on quantities to be purchased, prices and quality, together with keeping documents of each batch of purchases.

The Ministry of Animal Resources and Fisheries (MARF) performs several functions through the General Department of Quarantines and Meat Hygiene, Inspection and Vaccination centres and veterinary quarantines. Their role at the entry point of secondary quarantine facilities is the inspection for presence of notifiable or non-notifiable diseases, non-castrated males, emaciated and poor quality animals, and then vaccination. Finally Brucella testing is done, unfit animals for export are rejected, and then they issue certification. Animals are then ear tagged to identify state of origin to ensure good quality animal ready for export. In these actions, the role of appropriate agencies with appropriate facilities is to apply quarantine measures adopted from Codex Alimentarius (Sudan is a member since 1965), OIE, FAO/WHO measures and HAACP requirements. This is implemented by trained veterinarians. They continue re-inspection till the veterinary quarantine at export terminal point at Port Sudan and Sawakin. They isolate and reject animals at all levels till the point of loading vessels. Their activities are not only related to the health and veterinary requirements, but also market requirements such as the religious requirements in Saudi Arabia. During the Hajj period, animals have to meet conditions according to strict Islamic or Sharia law such as to be healthy and fat (not diseased, not emaciated, not having any abnormalities or deformities), no tail docking, ear cut no more than one-third of the ear, and not less than six months of age.

49 For live sheep exports, there are pre-purchase arrangements with importers, based on their requirements. The initial activity is started by a team of traders (who provide various services at cost), agents (Wakil) or subagents (who perform selection) and brokers (Sebbabi) for brokerage services and guaranteeing the animals’ ownership. The team work, for the identification and selection of export quality sheep based on quality criteria (breed, sex, age, weight, and nutritional status) and exclusion of localities with disease outbreaks. Then stock is purchased, either from commercial herds or from local traders, or collected through agents from nomadic encampment or primary markets. Then they practice the visual inspection/screening of animals for diseases to fulfil the requirements of exporters and Saudi Arabia certification requirements. Animals are collected into groups and trekked on hoof by shepherds to inspection centres with quarantine facilities. This is done by traders, agents (Wakil) or subagents and brokers (Sebbabi).

The next activity is the entry of animals into the secondary quarantine facilities for inspection and certification by public veterinary services at a fee. Animals are screened for notifiable or non-notifiable diseases, non-castrated males and then they are vaccinated. Finally, testing for Brucella ovis and certification is done and ear tagged ready for export. At this stage, animals are kept at short-term inspection and vaccination centres (secondary quarantine) such as el Kadaro Quarantine (Khartoum State) or el Khowei (West Kordofan) or el Showak (Gedarif), then transported by road or rail transport to terminal quarantines at Port Sudan and Sawakin. During this journey, the accompanying labour (gellab) takes care of the animals for keeping them in the upright or standing position all the time, to avoid fractures and morbidity. At the terminal export point there is the veterinary quarantine measures at Port Sudan and Sawakin where further inspection for Brucella is done and positive cases are rejected as unfit for export.

Some exporters, in addition to purchases in the supply hinterlands, make additional efforts to purchase sheep already available at Omdurman terminal market and when required start feedlotting to avoid weight loss so as to reach requirements of standards for export (health, weight and quality). This option is prompted by seasonal variation in supply of the appropriate type of sheep to meet seasonal and functional requirement in Saudi Arabia, such as for Hajj, Ramadan or vacations, and the variation in quantity and quality of feeds available. Health control measures are adopted in compliance with Codex Alimentarius standards. During this activity, local authorities collect taxes and market fees.

Clearance of the shipment is done by presenting all the official documents of the concerned government bodies—Ministry of Foreign Trade, health certificate from veterinary quarantine, quality assurance from SSMO, certificate of origin from chamber of commerce, counting and weighting records from the Port Corporation. Apart from fees for the above documents and

50 certificates, other costs involved during this stage include water and feed, shipping agents for the preparation of appropriate sea transportation and preparation of loading manifest and bill of lading cost, the private clearance office fees, the drovers (kullah) cost to load the vessel. At this stage, there are some rejections of sheep due to observed deficiencies, such as poor health. After loading sheep inside vessels, some exporters load feed to be used during sea trip up to unloading at Jeddah to minimize weight losses, or in worst case if the entire shipment is rejected for some reason, feed will be required for the return journey.

Finally at Jeddah port in Saudi Arabia, the shipment is subjected to inspection by veterinary authorities in accordance with import regulations and specifications, including Brucella ovis test conducted on all animals before clearance for unloading. The Saudi Arabian Standards Organization (SASO) is responsible for establishing labelling guidance and these guidelines are strictly enforced. There are specific requirements for all exporting countries to Saudi Arabia, Jordan, Egypt and Syria. Whole shipments are sometimes rejected even though disease symptoms have been confirmed only in a few animals. A reason for this is that Jeddah port does not have quarantine holding facilities where animals can be held under observation (Ibrahim 2004). Only in 2006 Australia established quarantine in Jeddah for their animals.

As for Sudanese lamb meat export, export slaughterhouses usually purchase sheep from suppliers at the slaughterhouse premises and sometimes from markets, and transport to short- term quarantine facilities, before moving to export abattoirs. This involves shorter time and distance compared to purchases for live sheep export.

At the export abattoirs, there is halal slaughtering, then skinning, evisceration, washing, and ante-mortem examination. Then the carcass is chilled for 24 hours, re-inspected, labelled, packed and loaded inside refrigerated trucks with thermo king switched on an hour prior to loading. Carcasses are unloaded at the airport into containers for transport, then final veterinary inspection is done before clearance for shipping by air, based on schedule of direct flight from Khartoum airport to ensure that the product is delivered at the required temperature, i.e. chilled to 0ºC. Once the shipment reaches Saudi Arabian importers (private companies, agencies, private buyers for supermarkets, hotels, restaurants) at designated airport, it is subjected to import regulations, inspection and clearance.

3.5.4 Health services, facilities and delivery system

Today’s primary policy focus is on livestock for trade and export—relating to a general concern to ‘modernize’ the sector, and boost production. This entails adopting a new approach to both livestock production and management and the delivery of animal health care and veterinary services to increase production and export. Potentially, this comes

51 at the expense of more simple initiatives to support productivity, breeding and disease management.

The local veterinary authority is the agency responsible for health certification at primary and secondary markets. But in 52% of the primary markets, there is no such service. The percentage of rejected animals from sale due to diseases during 2005 ranged from 1% to 5% in Gedarif and West Kordofan States and up to 10% in the Blue Nile State. These animals are sold locally at a lower price due to disease or defects. Some traders’ response to the question on suggestions to improve veterinary services (inspection procedures and issuing health certificates) at the market included a need to establish veterinary clinics, drugs, inspection, and extension services. Others demanded vaccination and inspection units. In Gedarif State, they demanded that the vaccination and inspection should be done in Gedarif instead of el Showak where there is quarantine for export animals.

In terms of facilities and effectiveness of government veterinary authorities at the state level, the survey revealed that about 80% of the veterinary centres have microscopes and autoclaves, 70% have field treatment kits, 60% have stethoscopes and 20% of veterinary centres have liquid nitrogen containers (for artificial insemination). The laboratory facilities in the government veterinary centres are also deficient. Reportedly, no bacteriological, parasitological, toxicology, biochemistry or pathology tests were performed in these state laboratories during 2005.

Almost all the veterinary staff was fully aware of the rules and regulations with regard to animal health, food safety and quality, and that these rules and regulations are adequate and clear to allow proper inspection to ensure health and safety. However, only about 50% of them undertook livestock market inspections during 2005 and 90% of them issued certification for animals prior to slaughtering.

The most frequent sheep diseases outbreaks, according to veterinary centres’ reports during 2005, were internal parasite, PPR and sheep pox. Suggested interventions include more vaccination cover, improved diagnostic facilities and extension services. From local veterinary authorities’ point of view, improvement of veterinary services, infrastructure improvement and training were needed to better assure quality and safety of export animals. With regard to veterinary quarantine centres during 2005, the most important diseases or conditions for which animals were excluded during inspection for export certification were sheep abscess, local inflammation, mange, sheep pox and brucellosis, but these specific causes were not properly and systematically recorded in the inspection documents and only the number of animals rejected on a daily basis was recorded.

52 Rejected animals from the livestock markets were either sold outside markets at less than 50% of their market price, or were treated, if the cost was low, with veterinary drugs or local medicine plus additional feeding. Otherwise, they were condemned by veterinary inspectors if slaughtered.

3.5.5 Sanitary measures in export slaughterhouses

All animals need certification prior to slaughtering at the export slaughterhouses. The certificates are issued by Federal Veterinary Authorities, the Quarantine and Meat Hygiene General Department. If certified animals have health abnormality at the ante-mortem inspection, the procedure to be followed is rejection and condemnation at post-mortem inspection. The waste is managed at the slaughterhouses and drained through the drainage system. First, they are filtered to extract rumen contents and dispose them out of premises. Blood is collected in tanks and disposed of in Kadaro, Ghanawa and Sabalogha, but in GIMCO it is treated for use as poultry feed. The rest of the fluids is drained and treated in ponds (a system of water recycling) ending with clean water usable for agriculture, but usually wasted.

Health and sanitary conditions of export slaughterhouses are well looked after. Regular cleaning and flushing with water is done after each batch is slaughtered and disinfected with safe chemicals (e.g. quadrate ammonia) and, in some slaughterhouses, fumigation is a routine practice.

The reasons for rejection at ante-mortem of sheep are mainly because of the inflammation of lymph nodes, wounds, fractures and emaciation. The reason for total condemnation of sheep carcasses are mainly jaundice, generalized abscesses or spots and contusions. Recommended animal health related improvements to meet domestic market demand are the availability of water sources in some slaughterhouses and proper means of transport for live animals. For export slaughterhouses, the most important sanitary measures to be met according to importers needs are the infrastructure rehabilitation (additional cold stores and vacuum packing machines).

3.5.6 Constraints in the system of quality assurance for export

The step-by-step actions for quality assurance described above—checks and cross checks by both Sudanese authorities and exporters as well as Saudi authorities and importers—should provide adequate safeguards for delivery of good quality and safe products as required by the importers. However, in practice, there seem to be inadequacies in the system that lead to high rate of rejection of animals and meat at various stages in the export chains.

53 Records from primary, secondary and port quarantines and port authorities show that during 1997–2005, 30.7% of the animals offered for export were rejected at various points in the domestic portion of the export chain starting from the first quarantine’5 and another 2.1% were rejected at the Jeddah port once the shipment was made (Table 21). At the Jeddah port, a whole vessel is rejected even when only one or two animals with unacceptable disease symptoms are detected. The rejected vessels indicated in Table 21 also had additional numbers of rejected goats and camels. Up to a maximum of 12% of goats and 3% of camels on these vessels were rejected in any one year compared to 4.6% for sheep.

Table 21. Number of sheep rejected at various points in the export chains for Sudan, 1997–2005 No. inspected No. exported % rejected % rejected Year × 103 × 103 in-country at Jeddah port 1997 2103 1750 16.8 na 1998 2783 2571 7.6 na 1999 3136 2133 32.0 na 2000 2057 1263 38.6 4.6 2001 400 15 * * 2002 3517 2256 35.9 1.1 2003 3517 2016 42.7 2.2 2004 3092 2217 28.3 0.9 2005 2678 1701 36.5 3.2 Average excluding 2001 30.7 2.1 * Export ban on live sheep to Saudi Arabia and other Gulf countries. Source: Calculated from MARF—Quarantine and Meat Hygiene General Department (monthly and annual reports) 2006. Animals are moved from producers to the export point through inspection centres and quarantines. At each stage, animals are screened both visually and through laboratory test, especially for Brucellosis. Since specific causes of rejection are not recorded at the quarantine and inspection centres, in order to identify the specific causes of rejection, especially at quarantine centres along the market chain up to the export port, three steps were taken in this study. First, quarantine records of two primary quarantines in North Kordofan—el Khowei and el Rahad—were examined in detail, and actual veterinary inspection and tests conducted at those centres were observed on some days at random. Second, blood samples from these centres are normally analysed at the el Obeid laboratory. In order to validate the testing procedure and results of tests conducted at this laboratory, duplicate blood samples of a subset of animals tested at el Obeid on a particular day were taken for testing at the University of Khartoum Veterinary laboratory using the same reagent and technique, and the results from both laboratories were compared. Third, screened and

5. To be more accurate, any voluntary rejection by traders and producers before animals reach the first quarantine need to be added to find the final figure for rejection as a proportion of the animals offered for the export market.

54 certified animals from primary quarantines are transported to terminal quarantines at port Sudan and Sawakin, so quarantine records at Port Sudan quarantine centre were analysed in detail.

At the primary quarantine centres, rejection occurs at two stages. First, animals are screened based on visual assessment primarily looking for unacceptable phenotypic characteristics in the export market. Second, after initial screening, Brucella test is performed on all remaining animals and positive cases are rejected. Available quarantine records at el Khowei and el Rahad quarantine centres for 2002–06 are summarized in Table 22. On average, 4.3 and 3.0% of the screened/tested animals were rejected respectively at el Khowei and el Rahad centres for non-specific reasons. On average, another 0.26 and 0.36% of the animals tested respectively at el Khowei and el Rahad centres were found Brucella positive, and hence rejected for export.

Table 22. Rejection rate of sheep according to cause at el Khowei and el Rahad quarantine centres in North Kordofan Sudan, 2002–05

El Khowei quarantine El Rahad quarantine No. of % rejected for % rejected % rejected for Year % rejected due No. of sheep sheep non-specific due to non-specific to Brucella +ve tested tested reasons Brucella +ve reasons 2002 335,619 0.11 3.71 335,619 0.06 10.10 2003 463,445 0.12 12.66 463,445 0.06 3.25 2004 428,387 0.37 2.13 417,696 0.19 1.24 2005 504,683 0.12 5.47 476,470 0.79 0.85 2006 783,939 0.43 0.17 236,910 0.79 0.03 Total 2,516,073 0.26 4.34 1,930,140 0.36 3.02 Source: El Khowei Inspection and Vaccination Centre (North Kordofan State) 2007; and el Rahad Inspection and Vaccination Centre (North Kordofan State) 2007.

Since cause of rejection at the initial stage based on visual assessment is not recorded for individual animals or in a comprehensive manner, group discussions were held with the technical staff involved in screening and testing animals at the two centres, which provided a general pattern of causes for rejection. It appears that at the el Khowei centre, the reasons for rejection vary by type/breed of sheep. Hammari is rejected mainly for abscess, Kabashi due to abscess and mange and Zaghawa due to Mange (Table 23). On the other hand, at the el Rahad centre, noncastration and abscess are the main causes of rejection. Some of these rejected animals may also include Brucella-positive cases, but that is not evident at this stage as Brucella cannot be confirmed without laboratory test.

55 Table 23. Percentage of inspected sheep rejected for various reasons by breed at the el Khowei inspection and vaccination centre in Sudan

% sheep Reason of % of sheep rejected at el Khowei by type/breed rejection rejected at el Rahad Hamari Kabashi Zaghawa Abscess 30 85 40 2 Wounds 1 5 2 2 Mange 5 2 40 90 Diarrhoea – 4 7 0 Emaciation – 4 4 1 Lameness – – 7 – Uncastrated 60 –– – Othersa 4 –– – Total 100 100 100 100 a. Including diarrhoea, emaciation, lameness and pneumonia. Source: El Khowei veterinary inspection and vaccination centre (2007) and el Rahad veterinary inspection and vaccination centre, North Kordofan state (2007).

The extent of Brucella incidence in sheep tested for the export market was further verified at the el Obeid laboratory, where blood samples from both el Khowei and el Rahad quarantine centres are tested. Test results at the laboratory for 2002–06 showed that incidence of Brucella in sheep intended for export varies by month or season (Table 24).

Table 24. Number of sheep tested for Brucellosis monthly at el Obeid laboratory coming from el Khowei and el Rahad quarantine centres in Sudan, and rate of rejection, 2002 to 2006

2002 2003 2004 2005 2006 Month Number % +ve Number % +ve Number % +ve Number % +ve Number % tested tested tested tested tested +ve January 67048 0.28 97206 0.28 287841 0.07 115812 0.22 0.22 0.59 February 139087 0.13 19325 0.13 10551 0.05 6512 0.11 0.11 0.64 March 103734 0.01 12403 0.23 29477 0.39 40741 0.34 0.34 0.77 April 16217 0.00 37070 0.34 64144 0.64 61318 0.80 0.80 0.89 May 47592 0.50 29304 0.04 44062 0.40 77109 0.87 0.87 0.74 June 8365 0.32 53349 0.07 57584 0.30 91396 2.13 2.13 1.41 July 9003 0.24 36761 0.05 32715 0.46 21957 1.82 1.82 1.60 August 3370 0.09 106348 0.06 15432 0.19 48304 0.61 0.61 0.85 September 51956 0.15 123207 0.05 64483 0.13 99432 0.67 0.67 0.86 October 152062 0.12 157074 0.05 85830 0.18 92037 0.36 0.36 0.62 November 96331 0.31 65953 0.08 140067 0.24 17006 0.30 0.30 0.74 December 9988 0.31 138649 0.05 221596 0.31 209661 0.46 0.46 0.73 Source: Ministry of Science and Technology, Animal Resources Research Corporation, Veterinary Research Laboratory—el Obeid, North Kordofan state (2007).

In order to confirm the efficacy of the Brucella test at the el Obeid Laboratory, on 5 June a random visit was made to the el Khowei Quarantine Centre when a batch of 2100 sheep

56 were being screened and el Obeid laboratory was collecting blood samples for Brucella test. In addition to observing the whole procedure, duplicate blood samples were collected from a random sample of 100 sheep out of the 2100 tested, and each blood samples were given identical identification numbers. One set was tested at the el Obeid laboratory and another at the University of Khartoum Veterinary Laboratory, using Rose Bengal reagent from Soba laboratory in both cases. Out of the 100 samples taken to the University of Khartoum, 39 were spoilt for a number of reasons, so the test results for the remaining 61 were compared on one to one basis with the results from the el Obeid laboratory. And all the cases were found negative in both the laboratories. The consistency of the test results confirmed that the procedure and the reagent used at the el Obeid laboratory were of acceptable standard. The laboratory was also found well organized.

Animals cleared by el Khowei, el Rahad and similar quarantine centres are transported to Port Sudan and Sawakin port Veterinary Quarantine Centre where they are again screened visually as well as tested for Brucella. Records of the centre for 2002–06 are summarized in Table 25. It appears that 2.5% to 7.1% of the animals tested at this stage were rejected mainly based on visual assessment, but there were also small number of rejections due to Brucellosis. Given that these animals have gone through fairly rigorous tests at earlier stages in the market chain, the rate of rejection at the port quarantines seems fairly high. Animals come from various supply hinterlands and quarantine centres to the port and the efficacy of the el Obeid laboratory may not be equally true for others. If these rejected animals could be screened out at earlier stages in the market chain through more effective visual screening as well as laboratory tests, transportation and other transaction costs on these animals could be saved, thereby enhancing the competitiveness of the net number of exported sheep. Not only are there costs for bringing these rejected animals to the port, they have to be transported back to domestic markets for disposal, which entail additional cost and ultimately impinge on both the exported sheep as well as the domestic consumer as the consumer price could be lower than what it ultimately will be.

Table 25. Percentage of tested sheep rejected for various reasons at the Port Sudan Veterinary Quarantine, 2002 to 2006

Brucella Inflamed Sheep Total Year Mange Emaciation Lameness Diarrhoea and non- Others lymph nodes pox rejected castrated 2002 4.8 0.87 0.90 0.12 0.06 0.30 0.01 0.01 7.1 2003 3.0 0.22 0.03 0.01 0.02 0.07 0.20 0.00 3.6 2004 1.2 0.34 0.65 0.00 0.13 0.40 0.02 0.00 2.7 2005 1.5 0.30 0.29 0.01 0.08 0.20 0.10 0.08 2.5 2006 1.9 0.32 0.08 0.12 0.09 0.02 0.01 0.003 2.6 Source: Calculated from Port Sudan Veterinary Quarantine figures, Ministry of Animal Resources and fisheries (2007).

57 4 Structure and performance of domestic and export markets for live sheep and sheep meat 4.1 Domestic markets 4.1.1 Characteristics of traders

Education and business experience: Forty-eight percent of sample traders at terminal markets were illiterate and 40% had pre-primary or primary level education compared to 38% and 36% respectively at the primary and secondary markets. On the other hand, 26% of the traders at primary and secondary markets had secondary or university education compared to 12% at terminal markets. This would not be normally expected, but this situation might have arisen due to the fact that majority of traders at the terminal markets were originally illiterate drovers from production areas, who delivered animals and stayed at the terminal markets. Initially they worked as brokers and then, with experience, gradually graduated to become traders. At the primary and secondary markets, 80% of the traders were involved in only buying and selling, and 20% were involved in buying and selling as well as served as brokers and/or guarantors for other traders. At the terminal markets, 90% were buying and selling and 10% additionally served as brokers or guarantors.

Nearly 40% of the traders at primary and secondary markets were involved in livestock trading business for over 15 years, while 80% of those at the terminal markets had similar experience. Some of the drovers turned traders might have come from families which were involved in livestock trading business. Twenty-seven percent of the traders at the terminal market reported that their fathers were livestock traders or were involved in livestock trading as drovers or guarantors; 21% of the traders at the primary and secondary markets said so. Among the sample traders in primary and secondary markets in Gedarif, Blue Nile and West Kordofan states, respectively 25%, 15% and 31% reported that their fathers were either livestock traders or were involved in livestock trade as drovers or guarantors. The rest of the traders came from families with other occupations, mostly agriculture and livestock rearing.

Physical and financial capital: The initial sources of finance of traders at all market levels are mainly own resources. The second main source is gifts from parents or family members. Traders at all levels of livestock markets start with small capital and grow slowly. Table 26 indicates sources of finance of traders at primary, secondary and terminal markets when business was started. Loan from formal sources was virtually absent for traders in primary and secondary markets. They often received deferred payments for animals sold to export traders who paid after receiving sales proceeds from Saudi Arabia, and traders in turn paid producers who supplied the animals. Such deferred payments might be more common for larger commercial producers as smaller producers usually sold animals due to need for immediate

58 cash and hence might not be willing to accept deferred payments. The entire chain runs on the basis of trust, and hence traders can run business with minimum cash capital.

Table 26. Sources of finance of traders in three states of Sudan when business was started by market type

% of traders by livestock markets Source of finance Primary Secondary Terminal Own resources 77 65 79 Gift from parents/family members/relatives 10 31 14 Loan from parents/family members/relatives 13 4 0 Inherited from parents 0 0 7 Total 100 100 100 Source: Livestock traders survey (2005).

In an answer to the question about possession of a shop/house in the market (primary and secondary) where traders operated, 28.6% answered yes. At the terminal market, only 3.5% possess a house.

Social capital: Since the products exchanged in the market are not standardized, and there is no formal mechanism for contract enforcement and dispute settlement, market operators develop alternative means or institutions to facilitate transactions when various market information (price, supply, demand) are not easily and readily available in the public domain. Under such circumstances, social capital may play a critical role in facilitating market exchange. Social capital is broadly defined as a ‘stock’ of trust resulting from close functional or emotional attachment to a group or society that facilitates the provision of public goods (Jabbar et al. 2008).

For traders of a particular commodity, social capital may be measured by the extent of network of trading contacts available to each trader. Such network may facilitate exchange between anonymous partners, reduce transaction costs of searching for potential partners, and also get access to market information (Jabbar et al. 2008).

Participation of sample traders in formal groups or associations that might play a role in the marketing process by providing various services and in price formation was very weak. Only 3% of traders at the primary market levels and 11% at the terminal market are members of trade association. At the secondary market level, membership is the highest (31%) in trade association.

Only 14% of the traders operating at the terminal markets go to secondary or primary market for purchasing animals, while 64% of the traders operating at the secondary markets do their business in 2–4 markets and 36% operate only in one market, but 21 % of the traders

59 operating in primary markets do their business in only one market, 29% in two markets and the remaining 50% in 3–6 markets.

Sources of information: Information on supply, demand and prices is an essential ingredient in any trading business as decisions on transactions and prices are made on the basis of this information. At the primary and secondary market levels, the available sources of information on prices, supply and demand are shown in Table 27. Personal observation, speaking with brokers/agents, speaking with regular customers and suppliers and speaking with other traders are major sources of information on prices, supply and demand at the purchase markets. Similar sources of information are used for information on the supply and demand in the sale markets and for export and import markets.

Table 27. Distribution of traders in three states according to sources of information in primary and secondary markets on prices, supply, and demand condition of purchase markets

Sources of information Percent of traders reporting Personal observation 100 Speaking with regular customers and suppliers 50 Speaking with brokers/agents 76 Speaking with other traders 46 No source 8 Mobile telephone 15 Exporters agents 4 From another primary market 2 Source: Traders survey data (2005).

The traders primarily get information on changes in government policies, regulations and taxes from other traders (36.8%), followed by newspapers (3.1%), and radio/television (11.1%). Almost 15% of traders have no source or access to information (Table 28).

Table 28. Distribution of traders in three states of Sudan according to main sources of information in primary and secondary markets on taxes, regulations and other government policies

Sources of information % of traders reporting Personal observation 25 Speaking with regular customers and suppliers 25 Speaking with brokers/agents 52 Speaking with other traders 75 No source 26 Mobile telephone 49 Exporters agents 20 From another primary market 3 Radio/TV 21 Marketing agencies 2 Source: Traders survey data (2005).

60 Contract violations: Transactions in livestock markets are based on verbal agreements as negotiated between the parties involved. There is no system of written documentation of transactions, with the exception of some cases on credit purchase where they have documents like Kimbyiala indicating the transaction as well as witnesses, or bonds, deferred payment cheques and the market fees receipt where they record the animal type and the agreed price, seller and buyer name. This lack of any written document increases the probability of contract violations. Certification fees are actually paid by only 17% of the traders.

The number of dispute, settled by local courts, with suppliers as well as with customers, is 6% among primary and secondary market traders. Traders experienced contract violations in the past year in the form of selling the same animal to another person, or attempts to renegotiate price. There were no cases of disputes settled by higher courts, or association arbitration, or community leader mediation, or by informal mediation by friends or by brokers/agents. Number of disputes settled by higher courts with customers was 2%, and that settled by community leader mediation with customers was also 2%.

The prevailing system of solving contract violations among primary and secondary market traders is referred to as Joodia. It is a system that involves a group of people from the community with talent in problem solving. At the terminal markets, trader’s dispute settlement is solved by the informal mediation of friends, brokers/agents or by Joodia.

Property rights: Theft was the most common problem. Traders at primary and secondary markets faced this at stocking grounds (25%), at own premises (4%), from the market and while trekking (each 4%) and while transporting and at the open pasture (2%). About 61% of the sample traders did not suffer from theft of animals during the 12 months preceding the survey;—27% suffered once from theft and 6% twice among primary and secondary market traders. These sheep traders lost an average of 13,261 Sudanese dinars (USD 567) due to theft. In 26% of the cases of theft, the traders at primary and secondary markets do not suspect any one for stealing their animals as they do not know the culprit, but in 6% of the cases the members from known families are involved, and in 2% of the cases own employees are involved.

In order to protect animals from theft, traders employ a shepherd to look after animals and guard them. When animals are trekked the traders’ means of protecting during trekking or transporting varies: 44% said they employed a good shepherd to look after animals and guard them, 18% travelled in convoys, and 7% had night halt near a reputed person’s house.

61 4.1.2 Performance of traders

In an attempt to understand the marketing and transaction costs of livestock trading business in Sudan, information was collected from each sample trader about his most recent completed purchase and sale transactions. For some traders and brokers at primary and secondary markets, the date of the last purchase is the same date of selling those animals as they purchased and sold on the same day. For such traders there is no capital cost for holding stock. But other traders purchased and kept the animals for up to four months. Travel and transport cost for traders in primary markets is assumed zero or negligible, as they travel either on foot or on donkeys, for which appropriate opportunity costs could not be calculated. All transactions were done in physical presence of the contracting parties, most of the costs were direct physical marketing costs; and transfer of property rights involved simple procedures without formal contract negotiations, documentation and enforcement procedures.

At primary and secondary markets, categories of sheep purchased and sold by traders are heterogeneous in nature. A trader may buy a particular type of sheep, e.g. adult male, culled female, young male etc. or a combination of types in a mob or batch as a unit or as single animals. Sales may occur in the same manner. Average price per animal from these combinations (or mix) differs greatly. It may be noted that animals are not weighed in Sudanese primary and secondary markets or even at export terminal markets. Exporters have to create batches of relatively uniform weight animals out of the production and marketing system that supplies heterogeneous animals. They do this by guessing the weight of animals and making a batch consisting of animals within a range of weight, e.g. heavy or medium weight. Too many underweight animals in a batch of heavy weight will attract less price, too many overweight animals in the batch may not attract as much value as reasonably desired. Thus, traders make a balanced batch to maximize average price. Similar phenomena were observed in Somali export market chains (ILRI 2007).

Apart from type and weight, other animal characteristics that determine price are breed, colour, general body condition etc. but data on such factors need to be collected for individual animals to be meaningfully analysed using hedonic price models, which was not possible in this study. The survey of 56 traders provided detailed data for the groups/mobs/ batches of animals they purchased and sold to estimate purchase and sale prices per head of sheep by type of animal at primary and secondary markets in the three states (Table 29). For certain types of animals, prices differed significantly between the three states, with prices in West Kordofan being generally highest. Within a state, prices differed between primary and secondary markets in most cases. Standard deviations were more often higher at primary market level, where heterogeneity of animals in a batch would be expected to be higher than in the secondary markets.

62 Table 29. Average purchase and sale prices per animal by type of animal at primary and secondary markets in the three states of Sudan (in Sudanese dinars)

Gedarif Blue Nile West Kordofan Purchase Sale Purchase Sale Purchase Sale price price price price price price Adult male Primary market 11,250 11,985 7376 8451 17,217 16,685 (354) (21) (1727) (1868) (3244) (8380) Secondary market 13,350 14,740 11,060 10,242 14,900 17,850 (3120) (3466) (2402) (3013) (3565) (3682) Young male Primary market 7727 9091 6250 8250 12,750 14,750 (354) (354) (1768) (1768) Secondary market 10,780 11,710 10,242 11,043 14,800 15,467 (502) (1433) (3013) (2606) (3020) (3287) Culled female Primary market – – – – 10,000 13,000 Secondary market – – 8000 9000 16,000 16,600 Breeding female – – Primary market – – 8367 9000 –– (1451) (1673) Secondary market – – 9000 9625 19,000 20,000 (2828) (3359) Young female Primary market – – 7500 9650 7500 9000 Secondary market – – – – 7500 – Note: Figures in the parentheses are standard deviations. Those without SD are averages for too few cases to allow test statistics to be calculated. Statistical tests show that price differences between states are significant in case of purchase and sale prices of adult sheep, purchase and sale prices of young sheep, and purchase and sale prices of breeding female. – Data not available Source: Trader survey data (2005).

For any particular type of animal, the difference between purchase and sale prices at a given market level is expected to be low as these transactions often take place the same day and do not involve extra cost of feed, water, transportation plus other transaction costs of marketing at a different market. For the same type of animal, the difference between purchase price at primary market and sale price at secondary market is expected to be large, but net difference will be lower (perhaps comparable to the purchase and sale price difference at the primary market) once marketing and transaction costs are considered. Generally traders at primary and secondary markets handling a reasonable size mixed batch (say over 30 animals of different types) make a profit of 300–500 Sudanese dinars (USD 1.3 to 2.2) per head.

The number and composition of animals bought and sold by 56 sample traders at primary and secondary markets in their most recent transactions before the survey are shown in Table

63 30. Eighty-one percent of purchased animals were adult males, out of which export animals are mostly derived. Young males comprising 16% of purchase may also provide some export animals. Overall, 59% of all purchases were sold at these markets. Only 49% of the adult males were sold, but nearly all the animals in the other categories were sold there. This means that only about 40% of the animals purchased at the primary and secondary markets may end up in terminal markets for export. The remainder may end up in domestic markets for consumption or back to the producers for breeding and flock replenishment.

Table 30. Number and composition of sheep transacted at selected primary and secondary markets by sample traders in three states of Sudan

Type of animal Number purchased Number sold % purchases sold Adult male 5333 (80.7) 2622 (67.4) 49 Young male 1028 (15.6) 1020 (26.2) 99 Culled adult female 46 (0.7) 46 (1.2) 100 Breeding female 100 (1.5) 100 (2.6) 100 Young female 102 (1.5) 102 (2.6) 100 Total 6609 (100) 3890 (100) 59 Figures in the parentheses are column percentages. Source: Traders survey (2005).

4.1.3 Major marketing problems

In about 76% of primary and secondary markets, the local administrative units are responsible for market fees, taxation, security, infrastructure development as well as being responsible for issuing trade licenses. In twenty-one percent of primary markets, no one is responsible. At the administrative unit level, some of the local community leaders have developed arrangements with some private individuals to collect fees from the market transactions without providing any services. In Blue Nile State, no one is responsible for management and fee collection in primary markets.

Sample traders in primary and secondary markets were asked to mention three marketing problems, in descending order of importance, for sheep and goat marketing. A particular problem might have been mentioned as number one by one trader, and as number two or three by another trader. Taking all three responses together, the most important sheep marketing problems from traders’ point of view in primary and secondary markets in the three states are summarized in Table 31. Multiple taxes, unstable price, lack of infrastructure/ facilities at the markets and unauthorized road taxes are the most important problems mentioned by traders. Low demand, low price in import market and no or limited access to formal credit are also major problems. It may be recalled that almost none of the traders mentioned institutional credit as source of their start up capital.

64 Table 31. Major marketing problems as perceived by traders in primary and secondary markets in the three states of Sudan

% of traders Major problems reporting Multiple taxes/high taxes 57 Unstable prices 35 Market have no infrastructure/facilities 33 Unauthorized road taxes 30 Low demand in the market/low demand for type of animals available in market/low 33 price No or limited access to formal credit 21 Low export market price/low demand in importing countries 23 High local price 14 Poor quality animals/absence of grades and standards 14 Unlicensed traders in market/Saudi traders buy directly/difficulties in obtaining license 14 No system of certification/Certification not done properly 8 No system for dispute settlement/others 5 High veterinary certificate fees (official and unofficial)/dispute on who will pay fees/ 16 tough penalties for not paying fees Source: Traders survey data (2005).

4.2 Export markets 4.2.1 Structure of the export trade

The LMMC played a key role in export trade until the early 1990s: a large number of exporters were involved in live sheep export, mainly serving as agents of the LMMC. The numbers of live sheep exporters declined from 350 in 1985 to 21 in 1995 when market liberalization policies were introduced and the direct role of LMMC in the export business was gradually reduced. This was therefore an indication of the increasing concentration in the export business. During the period from 2003 to 2006, there were a total of 72 live sheep exporters—companies and business firms or people. Among these, over the four-year period, the largest exporter handled 24% of the volume of export, top 3 exporters handled 43%, top 5 handled 60% and top 10 handled 78% of the total export volume (Table 32). Thus the live sheep export business is highly concentrated.

The structure of the sheep meat export business is even more concentrated. The number of exporters of sheep meat declined from 14 in 2002 to 5 in 2006, with only one company (Swakni) exporting more than 95% of total meat exports. Meat exporters usually have their sheep slaughtered at the established slaughterhouses, which are few. Sheep were slaughtered for export mainly in Kadaro abattoir and to a lesser extent in Sabalogha or Ghanawa; the first two abattoirs are governmental. There was some slaughtering in Nyala and GIMCO slaughterhouses and both are private.

65 Table 32. Number of Sudanese live sheep exporters and number of animals exported, 2003–06

Total number of sheep Cumulative No. of exporter % of total exported exported (%) 1 1,362,962 23.9 23.9 2 546,165 9.6 33.5 3 542,080 9.5 43.4 4 463,537 8.1 53.5 5 462,282 8.1 59.6 6–10 825,442 18.2 77.8 11–15 723,998 11.2 90.0 16–72 570,272 10.0 100.0 Total 5,702,728 100.0 Source: MARF (unpublished data).

4.2.2 Performance of live sheep export traders

Traders at primary and secondary markets start sorting and grading animals to create relatively more homogenous mobs or batches out of their multiple purchases in order to sell to export traders or their agents who visit these markets. The larger traders transport standardized animals to the terminal markets for selling to exporters. Performance of traders as measured by costs and returns for heavy and light weight export quality sheep originating in one selected market in each of the three states and ending up at the export port are summarized in Tables 33 and 34. In these and subsequent tables on this topic in this section, costs and returns are shown on per animal basis because domestic traders and exporters normally use per animal rates for pricing, costing, and return calculations in their usual trade business, and all formal and informal fees and taxes related to this business are also calculated and charged on an animal unit basis. Some charges, such as broker fees, may of course vary depending on the scale of the business but the going rate represents an average for a given market, which has been used here for estimation of costs and returns.

Among the cost items, the main cost difference was in the buying price by local traders in the three states—buying price in Gedarif and Damazeen being higher than in el Khowei. It is interesting to note that the buying price of heavy weight sheep in el Khowei is similar to the average selling price of adult male sheep in the secondary markets in West Kordofan state, but the buying prices in Gedarif and Damazeen are much higher than the selling prices of adult sheep in the secondary markets in these two states. The buying prices for lightweight sheep did not differ as much between the three states. The reason for this is unclear, except that the export animals are graded higher weight and higher quality animals derived from the mixed lots or batches traded at the secondary markets. In case of el Khowei, which is a prime export supply hinterland, the animals traded may be of a more homogenous character than in the other two states.

66 Table 33. Marketing costs and margins for export live sheep (average live weight 45 kg) originating in selected markets in three states of Sudan (SD/head), June 2005

Gedarif Damazeen Khowei in Items in Gedarif in Blue Nile W Kordofan Producers price 18,000 19,000 17,500 local trader’s margin (broker fees) 2000 2000 1000 Average purchase price 20,000 21,000 18,500 Market fees 300 200 160 Middlemen commission 100 100 100 Guarantor fees 50 50 50 Veterinary health certificate fees 180 100 100 Value added tax 185 100 – State tax stamp –– 50 Municipality tax 500 150 65 Business tax 125 0 0 Producers’ union 0 25 15 Education support fees 0 – 40 Veterinary services fees (local authority) 180 100 200 Federal wounded tax 25 25 25 Zakat 40 40 40 Shepherds and water cost (3 days) 300 – 50 Subtotal cost at market level 21,985 21,890 19,395 Showak vet. quarantine: inspection, vaccination, Brucella 385 – – ovis test and supervision Khowei vet. quarantine fees –– 77 Federal vet. inspection, vaccination 150 150 150 Incentives; inspection, vaccination 60 60 60 Brucella test 60 60 60 Transportation cost to Port Sudan 468 1000 1000 Truck driver incentive and labour cost (for guarding and 50 100 140 keeping sheep in upright position during the drive) Port Sudan local authority fees 50 50 50 Port Sudan inspection incentive 50 50 50 Unloading at Port Sudan and loading to Sawakin 50 50 50 Transportation cost (Port Sudan/Sawakin) 300 300 300 Unloading at Sawakin and shepherd cost 50 50 50 Feed and water (Port Sudan/Sawakin (7 days) 500 500 500 Total cost FOB Sawakin 24,158 24,260 21,882 Exporters profit margin 1142 1040 3418 Selling price FOB Sawakin sea port 25,300 25,300 25,300 Selling price FOB Sawakin Sea port = USD 110 = 25,300 SD. Source: Calculated from field surveys and personal communication with traders (2005).

Traders’ buying price (which should be the same as producers’ selling price) of heavy weight live export quality sheep in Gedarif secondary market (Gedarif State) averaged 71% of the export price in Sawakin. In Damazeen market in Blue Nile, it was 75% and in Khowei market

67 in West Kordofan State it was 69% (Table 33). As for the light weight export quality lambs, the buying price in Gedarif, Damazeen and el Khowei was respectively 77%, 67% and 73% of the export price (Table 34). These shares are rather high, but they seem reasonable because they are far selected higher quality animals out of the heterogeneous supply. If producer price for all types of animals sold at the primary markets is considered, the producer share of final consumer price (weighted average of export and domestic consumer price) should be much lower than is apparent in Tables 33 and 34.

Table 34. Marketing costs and margins of light weight export quality lamb (average 25 kg live weight or 12 kg carcass weight) originating in selected markets in three states to export port, June 2005 Cost in SD by market of origin Items Gedarif Damazeen El Khowei Producer prices 11,500 10,000 11,000 Local trader’s margin 1000 1000 1000 Average purchase price 12,500 11,000 12,000 Market fees 300 150 160 Middlemen commission (purchase) 100 100 100 Guarantor fees 50 200 50 Veterinary health certificate 180 100 200 Business tax 125 – 200 Value added tax 185 100 – Feed and labour cost 200 150 500 Transport cost to Omdurman market 550 1000 600 Inroad tax and expenses 50 100 50 Middlemen commission (selling) 200 100 100 Labour and feed cost 200 200 200 Total cost 14,640 13,200 14,160 Profit margin 360 1800 840 Selling price at Sawakin sea port 15,000 15,000 15,000 Source: Calculated from field surveys and personal communication with traders (2005). Another example for marketing margins and transaction costs for sheep purchased from Gedarif and exported either as live sheep (average 45 kg light weight) through Port Sudan or as meat (average 25 kg live weight) through Khartoum export abattoirs is illustrated in Table 36. Purchase price of the animals at the local market accounted for 80% of the final selling price for both live sheep and meat export, which appear quite high even though these are selected higher grade and higher quality animals. Rate of profit is higher for live sheep export than in meat export, but absolute profit per animal is not comparable because the size and type of animals and the investment involved are not the same. Given the different requirements of the live sheep and meat export outlets, animals cannot be easily redirected from one outlet to the other in case of a short run change in relative prices.

68 Table 35. Marketing cost per head (in SD) of live sheep from production areas to the export port in Sudan for two export companies in 2006 Cost items Fadous Company H.H. Company 1 Purchase price 18,000 18,000 2 Market fees (local authorities) 300 150 3 Local pasture fees (local authorities) 100 100 4 Labour (herding) 100 5 Vaccination fees 150 100 6 Quarantine fees (MARF) 105 150 7 Vaccination services by veterinary authorities staff 30 30 8 Veterinary authorities staff for loading services 30 77 9 Brucella test fees 40 50 10 Local veterinary authority 20 11 Veterinary laboratory labour cost for brucella test 25 25 12 Taxation stamp duty 50 50 13 Local authority fees (el Khowei ) 50 50 14 Jihadia fees 10 15 15 Producers union fees (Itihad el Roah) 10 10 16 Shaheed fees 20 25 17 Jareeh fees 25 50 18 Water 100 19 Transit 50 20 Loading labour cost 23 25 21 Internal transport 100 22 Administrative cost 200 23 VAT for local transport per head (10% ) 150 60 24 Transport cost from inspection centres to Port Sudan 1500 600 25 Feed and water, labour, drugs cost for 7 days 1000 1000 26 Duties/fees (at port of shipment) 205 100 27 Port fees (at port of shipment) 120 50 28 Port Sudan veterinary quarantine inspection fees 30 30 29 Port Sudan veterinary quarantine services fees 10 10 30 Port Sudan local authorities environment fees 100 100 31 Clearance fees 20 15 32 Transport cost from Port Sudan to Sawakin 200 200 33 Internal transport 50 34 Loading and unloading at Sawakin 100 100 35 Labour cost (shepherds) 100 36 Sawakin local authority 100 37 Labour cost for loading 50 38 Loading inside ship (vessels) 25 25 39 Veterinary authorities fee 45 40 Endorsement of certificates and other documents 250 Total cost 22,428 22,362 Revenue USD 120 @ 230 SD = 1 USD 27,600 27,600 Margin (SD) 5172 5238 Note: VAT for local transport per head (10%) is refundable. H.H. Company Limited worked on commission basis, the finance is by the Saudi importer. Source: Fadous Trade and Investment Company limited, and H.H. Company Limited (2006).

69 Table 36. Marketing costs and margins per head for live sheep and meat export from Gedarif State in Sudan (May 2005)

Live sheep export Meat export Cost items (Average 45 kg live weight) (Average 25 kg live weight) Value (SD) % Value (SD) % Average purchase price 20,000 79.1 12,500 83.3 Market fees 300 300 Middlemen cost 100 100 Guarantor 50 50 Veterinary health certificate fees 180 180 Veterinary inspection, vaccination, 385 – Brucella test and supervision Stocking tax 175 175 Zakat 40 40 Business tax 125 125 Wounded tax 25 25 Transportation cost 465 550 Quarantine and port cost 150 Feed and labour cost 200 Facilitations 50 Subtotal marketing costs 1995 7.9 1795 12.0 Total cost 21,995 87.0 14,295 95.3 Profit margin 3305 13.0 705 4.7 Selling price 25,300 100 15,000 100 Source: Trader survey data (2005).

We have previously presented the local prices of animals transacted at primary and secondary markets in West Kordofan state, part of which are transported by traders to terminal markets for selling to exporters. However, some exporters purchase export quality sheep in lots from larger or commercial herders directly themselves or through their designated agents or through brokers, and export to Jeddah. This reduces the number of intermediaries. Broker’s commission varies greatly depending on the number and size of the commercial herds accessed to make an export lot or batch, the distance and the effort made. The commission ranges between 100 and 500 SD/head. Cost and returns for such an operation from el Khowei market area to Jeddah are summarized in Table 37. Producer price or purchase price in this case accounted for 78% of all domestic costs or 59% of the final Jeddah price. The gross profit margin of the exporter was USD 19.55 per head or about 18% of the final price. Whether this was a normal profit margin could not be judged because of the lack of information on opportunity cost of capital in the market.

70 Table 37. Estimated cost and margins of heavy weight (average 45 kg live weight) sheep from el Khowei market in West Kordofan in Sudan to Jeddah via Port Sudan (June 2005)

Value/head Items % of final price (SD) Average purchase price/head 15,000 59.2 Market fees 100 Middlemen commission 150 Guarantor fees 50 Health inspection (West Kordofan Ministry of Agriculture) 100 State tax stamp 50 Producers union fees 15 Education support fees 25 Veterinary services fees (local authority) 20 Federal wounded tax 25 Zakat 40 Shepherds and water cost (3days) 50 Khowei veterinary quarantine fees 77 Federal veterinary inspection, vaccination 150 Incentives; inspection, vaccination 60 Brucella test 60 Subtotal marketing costs at el Khowei 972 3.8 Transportation cost by trucks (Khowei/Port Sudan) 1000 Truck driver incentive and labour cost (shepherd or 140 Gellab for guarding and keeping after sheep ) Port Sudan local authority fees 50 Port Sudan inspection incentive 50 Unloading at Port Sudan and Loading to Sawakin 50 Transportation cost (Port Sudan/Sawakin) 300 Unloading at Sawakin and shepherd cost 50 Feed and water Port Sudan/Sawakin (7 days) 500 Rejection and mortality cost 500 Customs, duties, ports and clearance cost 350 Business tax (addition or subtraction tax 1%) 200 Subtotal costs between el Khowei and Sawakin 3290 13.1 Total cost Free Aside ship (FAS) 19,262 76.1 = USD 83.75 Shipping freight USD 4.00 Transport (plus loading and unloading) at livestock market USD 2.70 Total cost including freight to Jeddah USD 90.45 82.2 Gross profit USD 19.55 17.8 Selling price at Jeddah (Saudi Arabia) USD 110.00 100.0 Source: Trader survey data and personal communication (2005).

An important feature of Sudanese livestock marketing chain—including both domestic and export routes—is that in reality producers supply a significant part of the business capital by accepting deferred payments from traders. The system runs on the basis of trust among

71 the chain actors, and allows active and vigorous business in the absence of formal sector credit for the livestock producers and traders. The Animal Resource Bank usually provides finance to exporters, but rarely or inadequately to smaller traders who are the backbone of the export trade. This deferred payment may be one possible reason for higher producer price of export quality sheep as producers perhaps add time value of money in asking the sale price.

4.2.3 Major marketing problems of live sheep and meat exporters

Major purchase problems for traders at primary, secondary and tertiary markets are the lack of sufficient numbers of sheep during the dry season and the high cost involved along the chain. Hamari sheep within the range of 46–48 kg live weight is the preferred quality in Saudi Arabia, but supply of this type of sheep varies by season and they are also very costly.

For exporters, the main problem is competition from other exporting countries in the Saudi market. Export batch size ranges between 4000 and 20,000 heads at a time and 30 to 50 batches are exported during a year, depending on the local supply and demand in the export market. Time schedule and export program is not fixed by live sheep exporters, except during Hajj season. Mostly they depend on the demand and purchase order from the importer. Traders reported that major health problems in the market are sheep pox, mange and diarrhoea, which affect procurement, inspection, batch formation and transportation. This is because much risk is involved when animals from different sources and with unexposed symptoms at the time of purchase are bulked for long distance transportation. Sometimes, exporters ship animals to Saudi Arabia without prior contract, and the transaction deal occurs after the arrival of sheep in Saudi Arabia, which means the exporters take the burden of extra feed and water and any other risk until the lots are sold. This may reduce their bargaining power and make them vulnerable to the pressure to sell at lower prices as keeping animals longer for better price will entail extra cost which may or may not be recoverable. Traders’ suggestions to improve live sheep export included minimizing the government taxes, fees and levies plus subsidies or incentives to support live sheep exports.

In case of sheep meat export, 60% of the exporters purchase by kg carcass weight of export lamb meat and pay in cash, 20% purchase through commission agents from el Salam terminal market and 20% purchase through commission agents from production areas. Purchase problems of sheep were shortage of supply during summer, especially during May and June, high prices and emaciation, and possibility of loss due to theft. Major meat exporters’ problems were multiple taxes and fees with virtually no services, taxation problem at the federal level, lower exchange rate, and competition from other countries in terms of prices.

72 Exporting companies reported airfreight problems as there were no specialized flights for meat. Only cargo or passenger flights carry meat whenever there is space, and with small space available on the planes, there are booking problems and delay in peak season. Also there was no storage or cooling facilities or chilling containers at Khartoum airport, which seriously hamper delivery of meat at right temperature in case of flight delays.

4.3 Spatial price integration

Supply hinterlands for Sudanese export sheep is quite large as shown previously and varies in terms of types of animals (breed, size, colour, meat quality and taste). If the demand for these varying types of animals in Saudi market is not differentiated, i.e. if one type is easily substituted for another depending on availability, then there should be price competitiveness in the domestic market for sheep originating in different supply hinterlands. Also if there is no formal barrier to enter any market for any livestock trader and if there is free flow of information, sheep markets should be integrated, and prices in supply markets and terminal markets should move together. Opportunities for deriving rent or premium price for special demand will be less. Among the three states surveyed in this study, Gedarif and Blue Nile have common borders and are nearer to Khartoum, the largest domestic market, as well as the export ports, while West Kordofan is farther away from these two states as well as from Khartoum and the export ports. This study attempted to establish if the relative prices in the markets in these three states and the terminal market in Khartoum move together, i.e. to test if prices in these states may be integrated and transmitted easily.

One widely used method to test for spatial market integration is to apply co-integration test. This method tests for co-movement of prices from different places and searches for long-run relationships between them. When prices of the same commodity from different places move together in the long run, the information of local surplus and deficit is considered to be well transmitted across space. Therefore, the market for that good is considered well integrated. Market integration occurs when product flows between markets on the same terms and conditions as within markets. A highly integrated commodity market is likely to increase market efficiency through efficient resource allocation and price transmission, which is likely to lower transaction costs and increase incomes to actors, see for example Ochieng et al. (2006).

Co-integration is an econometric technique for testing the correlation between non-stationary time series variables. If two or more series are themselves non-stationary, but a linear combination of them is stationary, then the series are said to be co-integrated. Before the 1980s, many economists used linear regressions on de-trended non-stationary time series data, which Engle and Granger (1987) and others showed to be an inappropriate approach

73 that could produce spurious correlation. It is often said that co-integration is a means of valid hypothesis testing between two variables having unit roots (integrated of order one). That means a series is said to be integrated of order d if one can get a stationary series by ‘differencing’ the term d times. The usual procedure for hypothesis testing between non- stationary variables is to run OLS regressions on data which had initially been differenced. Although this method is appropriate for large samples, co-integration provides more powerful tools when the data sets are limited, as most time-series are.

The two main most common methods for testing for co-integration are: the Engle-Granger two-step method (Engle and Granger 1987) and the Johansen (1988) procedure. In practice, co-integration is used for such series in typical econometric tests, but it is more generally applicable and can be used for integrated variables of higher order to detect correlated accelerations or other second differencing effects.

In autoregressive models in econometrics, a unit root is present if the coefficient | b | = 1 in , where yt is the variable of interest at time t, b is the slope coefficient, and is the error component. If the unit root is present, the time series is said to have a stochastic trend or being integrated of order one or I (1). An augmented Dickey-Fuller test is a test for a unit root in a time series sample (Dickey and Fuller 1979). The ADF statistic, used in the test, is a negative number. The more negative it is, the stronger the rejections of the hypothesis that there is a unit root at some level of confidence (Said and Dickey 1984).

In this study, market integration was tested using monthly sheep market price data from secondary sources for six years (2001–06) for Omdurman terminal market in Khartoum and el Obeid and Demazeen secondary markets in West Kordofan (now part of North Kordofan) and Blue Nile respectively. Thus 72 observations were available for each market (Appendix 2). The test focused on investigating the price co-integration between Omdurman terminal market and el Obeid and el Damazeen secondary markets. First, the sheep price series for Omdurman, el Obeid and el Damazeen were tested for stationarity using the ADF unit root test. After confirmation of non-stationarity, the price series were tested for co-integration applying the Johansen (1988) method. Econometric Views (E Views) software was used in the estimation of parameters.

For testing co-integration relationship in the three livestock markets, the adopted price dates were the monthly average prices. Price data were collected by category of sheep (such as adult male sheep) and divided into two categories in terms of trade, whether for domestic consumption or for export. For adult male sheep, no price differential by grade, quality or breed was recorded. The prices for two markets—Omdurman and el Obeid—were derived from the daily average prices collected by Animal Resources Services Company

74 and calculated as weighted monthly averages. The same was done by el Damazeen Animal Resources authorities.

Estimated statistics for the test for stationarity of the prices are shown in Table 38. The ADF test statistics are all larger than the critical values at less than 5% for some and less than 10% for others. The ADF series first difference statistics are larger than the critical values at less than 5% or 10% level, so the null hypothesis of existence of unit root is accepted, i.e. the hypothesis of price stationarity is rejected.

Table 38. Estimated statistics for unit root test for prices movement and three estates in Sudan Series in log ADF series test ADF series first difference Omdurman –1.6209 –3.9127 El Obeid –0.9458 –3.8883 El Damazeen –2.1694 –4.5775 Series H0: Unit root; H1: Stationarity around a constant. Critical values –2.89 (5%) and –2.58 (10%). First difference H0: Unit root with drift; H1: Linear trend stationarity. Critical values –3.40 (5%) and –3.13 (10%).

Since the price series are non-stationary, Johansen’s co-integration test was applied and results are presented in Table 39. R is the number of co-integrated vectors (in matrix). If R = 0 there is no integration. The values of r indicate that the markets are co-integrated. Also Lambda-max test values (Eigen value) are less than critical values and trace test statistics are also less than the critical values, which indicate potential long run co-integration relationship between the livestock markets under discussion, thus revealing that the prices will move together overtime and converge towards equilibrium in the long run.

Table 39. Johansen’s co-integration test results for number of co-integrated vectors for prices in three livestock markets in Sudan Null Lambda-max Critical* Trace Critical* VAR (p) Series in log hypothesis test values test values order Omdurman, el Damazeenn r=2 3.7 8.1 3.7 8.1 1 and el Obeid Omdurman** and el Obeid r=1 4.3 9.1 4.3 9.1 1 Omdurman and el Damazeen r=1 2.7 8.1 2.7 8.1 2 El Damazeen** and el Obeid r=1 6.8 9.1 6.8 9.1 1 * at 5% ** Restrictions on intercept imposed. The results of impulse response function show that a shock to the price in one market will manifest in the other market as well, as illustrated in Figures 14 to 19. Responses between two markets have been mapped on a pair wise basis, showing the impact of price change in one market on the price in another and vice versa.

75 1.7997E-001

-1.7997E-001 0 10

Figure 14. Response of LN [def Omdur] to a unit shock in LN [def EI Obeid].

1.8837E-001

-1.8837E-001 0 10

Figure 15. Response of LN [def EI Obeid] to a unit shock in LN [def Omdur].

1.7436E-001

-1.7436E-001 0 10

Figure 16. Response of LN [def Omdur] to a unit shock in LN [def EI Damaz].

1.148E-001

-1.1448E-001 0 10

Figure 17. Response of LN [def EI Damaz] to a unit shock in LN [def Omdur].

76 2.0738E-001

-2.0738E-001 0 10 Figure 18. Response of LN [def el Obeid] to a unit shock in LN [def eI Damaz].

1.1752E-001

-1.1752E-001 0 10

Figure 19. Response of LN [def el Damaz] to a unit shock in LN [def EI obeid]. Figures 14 to 19. Impulse response functions for price shocks in the selected markets.

Figures 14 and 15 illustrate the presence of co-integration between Omdurman and el Obeid sheep markets and indicate that the two markets are dependent on each other. A price shock in el Obeid sheep market will create a sharp response in Omdurman market initially, then level off (Figure 14), but the reverse response, i.e. the effect of a price shock in Omdurman on el Obeid, is not that strong (Figure 15). Granger Causality test which involves examining whether lagged values of one series have significant in-sample explanatory power for another variable to provide proof of the direction of price flow from the major source market to the terminal market was applied to validate the responses in Figures 14 and 15. It was found that whenever there is a positive change in el Obeid sheep market, the Omdurman sheep market reacts to that change positively.

Figures 16 and 17 show that a price shock in el Damazeen will have weak response in Omdurman, but a price shock in Omdurman will have a mild negative response in el Damazeen. This could be due to small volume of supplies from el Damazeen to Omdurman market. Figures 18 and 19 show that a price shock in el Damazeen will have a negative response in el Obeid, but the reverse will generate a stronger negative response. This may also occur because both markets are supply markets for Omdurman, but not so much for each other. Because of the differences in their relative importance as supply sources, they react slightly differently.

77 References AAAID (Arab Authority for Agricultural Investment and Development). 2005. The Arab company for trade and export. Unpublished report. Khartoum, Sudan. Aklilu Y. 2002. An audit of the livestock marketing status in Kenya, Ethiopia and Sudan. Volume 1. African Union–Interafrican Bureau for Animal Resources (AU–IBAR), Nairobi, Kenya. Brückner GK. 2004. An evaluation of the alternatives and possibilities for countries in sub-Saharan Africa to meet the sanitary standards for entry into the international trade in animals and animal products. Consultancy report to AU–IBAR and OIE 1–36–38. Central Bank of Sudan. 2004. Annual Report. No. 44. Khartoum, Sudan. Dickey DA and Fuller WA. 1979. Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74:427–431. el Dirani OH. 2007. Potential of Sudanese exports of sheep and sheep meat to the Middle East. Masters thesis, University of Khartoum, Sudan. 151 pp. Dyck JH and Nelson KE. 2003. Structure of the global markets for meat. Agriculture Information Bulletin No. 785. USDA, USA. Engle RF and Granger CWJ. 1987. Co-integration and error correction: Representation, estimation and testing. Econometrica 55:251–276. FAO (Food and Agriculture Organization of the United Nations). 1997. Livestock and red meat export marketing. Volumes I and II. Reports for the Arab Authority for Agricultural Investment and Development, Khartoum, Sudan. FAO, Rome, Italy. Gabre-Madhin EZ. 2001. Market institutions, transaction costs and social capital in the Ethiopian grain market. Research Report 124. IFPRI (International Food Policy Research Institute), Washington, DC, USA. Hassan RM. 2006. A review of community animal health delivery system with reference to small ruminants and market access in the Sudan. Masters thesis, University of Khartoum, Khartoum, Sudan. 124 pp. Hoff K and Stiglitz J. 1990. Introduction: Imperfect information and rural credit markets: Puzzles and policy perspectives. World Bank Economic Review 4(3):235–250. Ibrahim A. 2004. Sudanese livestock export marketing and competitiveness. Unpublished report submitted to the Ministry of Agriculture and Forestry for FAO and WTO. ILRI (International Livestock Research Institute). 2007. Towards improving livestock export marketing support services in Somalia: Survey findings and implications. Report submitted by International Livestock Research Institute to Terra Nuova. ILRI, Nairobi, Kenya. Jabbar M, Benin S, Gabre-Madhin E and Paulos Z. 2008. Market institutions and transaction costs influencing trader performance in live animal marketing in rural Ethiopian markets. Journal of African Economies 17(5):747–764. Johansen S. 1988. Statistical analysis of co-integration vectors. Journal of Economic Dynamics and Control 12:231–254. Kotler PP and Keller KL. 2006. Marketing management. Pearson Education, Akadémiai Kiadó, Budapest. MARF (Ministry of Animal Resources and Fisheries). 2005. Department of Animal Resources Economics Administration Records. Khartoum, Sudan. MARF (Ministry of Animal Resources and Fisheries). 2008. Export of Sudanese sheep. Government of Sudan. (Available on CD-ROM). Mariner JC. 2007. Assessment of livestock and livestock product markets in selected countries in the Middle East. Consultancy report submitted to the International Livestock Research Institute, Nairobi, Kenya. Mimeo.

78 Mariner JC and Paskin R. 2000. Manual on participatory epidemiology: Methods for the collection of action oriented epidemiological intelligence. FAO (Food and Agriculture Organization of the United Nations), Rome, Italy. Mohammed ASA. 2006. Sero-prevalence and impact of selected diseases (Peste des petits ruminants and heartwater) affecting small ruminants in Western Krodofan (Elkhowei), Blue Nile and Gadarif States of the Sudan. Masters thesis, University of Khartoum, Khartoum, Sudan. Negassa A and Jabbar MA. 2008. Livestock ownership, commercial offtake rates and their determinants in Ethiopia. ILRI Research Report 9. ILRI (International Livestock Research Institute), Nairobi, Kenya. North DC. 1990. Institutions, institutional change and economic performance. Cambridge University Press, Cambridge, UK. Ochieng B, Kariuki G and Kaitho R. 2006. Assessing market integration in the presence of transaction costs: The case of pastoral livestock markets. Research brief 04–06– LINKS. http://www.glcrsp. ucdavis.edu. Padberg DI, Ritson C and Albisu L. 1997. Agro-food marketing. CABI (Commonwealth Agriculturall Bearau International), Oxon, UK. Said E and Dickey DA. 1984. Testing for unit roots in autoregressive moving average models of unknown order. Biometrika 71:599–607. Williamson O. 1985. The economic institutions of capitalism. Free Press, New York, USA. Young H. 2005. Darfur: Livelihoods under siege. Final report to the USAID/OFDA under the Livelihoods Cooperative Agreement with Tufts University, USA.

79 Appendix 1 Local names of the important diseases/ conditions reported by livestock producers in the survey areas

Disease/ Brief description reported Local name Scientific name condition by the respondent Abortion Torah Abortion Abortion Arthritis Abu radaa/Guruz Lameness, inability to move Arthritis CCPP Abu neeni/Abu koweris Cough, difficulty breathing, crust CCPP in nostril Diarrhoea Reet/Khorg Diarrhoea Diarrhoea Foreign body Omdaradim/Jesimgarib Emaciation, palpable hard body Abomesal in stomach phytobezoars Dullness Dogass Tired, depression Dullness Haemorrhagic Tasamom Bloat, swelling about the throat, H.S septicaemia sudden death Heartwater Abu kashar/Abu gelaib/ Respiratory stress, diarrhoea, Heartwater Khadar/Abu dadoya emaciation, nervous signs, water in heart and death Mastitis Goruz/Hadaya Oedema of udder Mastitis Pneumonia Abu feshaifish/ Cough, nasal discharge, difficulty Pneumonia Om tonkul/Iltihab breathing, off food Poisoning Samti/Tasamom Bloat, diarrhoea, sudden death Plant poisoning Peste des petits Abu demayaa Nasal discharge, lachrimation, PPR ruminants diarrhoea, death Sheep pox Jadari Skin lesions (nodule and Sheep pox ulceration), cough Stomatitis Abu khadra Errosion on tongue and gum Stomatitis Wounds Dabara/Juroah Wound Wound Internal parasites Hulaa, Hoomra, Dedan Oedema at the jaw, diarrhoea, Haemonchosis/ emaciation, warms in faeces Paramphistomum Botulism Abu regaiba/Abu denaib Nervous signs, death Botulism Abscess Koraj Oedematous nodules at lateral Caseous side neck lymphadenitis Avitaminosis Aama Blindness Avitaminosis Foot rot Abu dulaa Lameness Foot rot Tick infestation Gurad/gamul Emaciation and presence of ticks Tick and lice on the body infestation Source: Mohammed (2006).

80 Average Average price 22,625 2006 Sales 378,560 Average Average price 20,542 2005 Sales 404,929 Average Average price 13,708 2004 Sales 31,125 11,500 41,324 12,500 32,559 25,000 312,157 Average Average price NA 11,770 2003 Sales 371,367 Average Average price 9300 31,711 9029 2002 Sales NA 220,239 Average Average price 23,000 2001 Monthly sales volume and prices of adult male sheep in Omdurman Monthly sales volume Sales 5512 22,000 7209 21,000 9697 8800 22,605 12,000 21,887 12,000 51,483 21,000 26,062 21,000 9705 22,000 10,700 9500 28,231 13,000 25,346 11,000 31,777 17,000 29,333 20,000 6525 27,000 14,645 8700 30,244 11,500 21,217 12,000 24,049 12,500 30,094 20,000 6049 27,000 18,532 8750 29,696 16,750 21,356 12,000 31,135 20,000 27,420 19,500 7045 29,000 19,382 9600 26,506 10,250 21,399 15,000 24,118 21,000 19,886 22,000 7583 22,000 19,320 9900 30,890 12,000 20,373 16,000 20,427 27,000 29,292 24,000 8657 21,000 21,566 9600 29,598 12,500 21,940 17,000 29,409 25,000 34,508 26,000 8909 22,000 32,000 9100 39,663 11,000 27,384 16,500 32,217 23,000 36,551 20,000 11,347 21,000 25,017 8700 36,307 10,000 29,476 13,500 38,566 26,000 32,257 27,000 13,535 20,000 30,161 8300 32,631 10,500 29,330 13,500 31,970 16,500 36,577 19,000 12,836 22,000 28,219 8100 33,285 10,000 41,324 14,500 48,455 25,000 44,021 28,000 104,912 dinar. dinar. Sudanese Sources: Animal Resources Services Company, Sudan, unpublished data. Services Company, Animal Resources Sources: Month Price in Appendix 2 market, Khartoum January January February March April May June July August September October November December Total Annual average price Annual average

81 35,207 Sales 2006 16,521 Average Average price 27,538 Sales 2005 13,688 Average Average price 26,195 Sales 2004 13,063 Average Average price 31,637 Sales 2003 9397 Average Average price Sales 61,980 2002 7633 Average Average price Sales 31,786 2001 Monthly sales volume and prices of adult male sheep in el Obeid livestock and prices of adult male sheep in el Obeid livestock Monthly sales volume Average Average price 87508700 10887650 1742 125007600 1970 83007600 10,562 2056 57507350 7350 2340 6350 92086900 1717 5650 29655900 7565 2103 4699 6500 35835750 6350 3028 14,500 8500 31505500 7500 4550 2108 8350 2494 34416250 9500 2383 11,500 2628 8500 3650 18,0007250 11,000 6090 12,000 3263 5600 10,728 2191 8297 11,500 2721 12,500 1941 7350 6712 2889 10,000 556 12,750 16,000 13,250 8250 4352 1522 779 3353 14,000 13,000 1581 9500 4758 3094 844 1492 13,500 5500 13,000 11,000 15,000 1357 1482 15,000 939 9000 1797 12,500 2128 1584 15,000 5633 1506 1101 12,500 13,000 1577 1785 15,750 13,500 14,000 14,000 18,750 2567 1323 2819 1776 18,250 2734 1466 1774 13,500 13,500 16,250 15,750 1785 13,500 2215 14,500 1715 2195 6738 1854 2411 4467 14,500 15,250 16,000 15,750 2128 2176 3896 2605 16,500 19,000 2880 5123 dinar. dinar. Sudanese Price in Month Appendix 3 market, North Kordofan Sources: Animal Resources Services Company, Sudan, unpublished data. Services Company, Animal Resources Sources: Annual average priceAnnual average 7100 January January February March April May June July August September October November December Total

82 36,562 Sales 2006 Average Average price Sales 2005 Average Average price Sales 2004 Average Average price 15,584 16,021 15,517 Sales 35,366 21,267 33,286 2003 Average Average price 15,354 27,797 Sales 2002 16,104 Average Average price 28,758 Sales 2001 Monthly sales volume and prices of adult male sheep in el Damazeen Monthly sales volume 16,50019,750 238013,500 300013,500 14,500 237014,500 17,500 2310 230015,500 17,500 3100 282013,500 16,500 14,500 3425 220014,750 19,000 16,250 2375 200014,000 14,000 3600 16,250 2900 290017,000 16,500 3900 12,500 18,00 2070 2200 470017,000 16,500 4150 12,500 17,000 1300 2315 345015,750 14,750 16,000 13,250 3970 15,500 1200 4500 2500 2850 13,500 3200 12,750 13,500 13,500 1500 3100 1800 16,500 16,500 2870 12,750 13,250 2000 13,500 1900 4200 2610 14,000 2005 16,500 2807 14,000 14,250 13,500 2800 1200 13,250 1005 2300 3270 17,000 16,750 14,750 2917 2800 700 615 1930 16,250 16,750 13,500 14,500 7200 13,750 573 2107 16,750 3100 16,750 14,000 4000 14,600 620 2215 1613 19,750 16,500 5200 413 2317 653 19,750 17,600 18,000 1220 1100 18,250 786 15,000 17,500 1816 1250 17,000 17,500 747 1300 20,000 489 18,000 2300 16,500 5030 9500 13,500 3200 Average Average price dinar. dinar. Sudanese Annual average priceAnnual average 14,437 January January February March April May June July August September October November December Total livestock market, Blue Nile State livestock Appendix 4 Month Price in Sources: Animal Resources Services Company, Sudan, unpublished data. Services Company, Animal Resources Sources:

83 ILRI International Livestock Research Institute

Research Report 16

Constraints in the market chains for export of Sudanese sheep and sheep meat to the Middle East

ISBN 92–9146–195–4